INSURANCE CODE - NOT CODIFIED
CHAPTER 9. TEXAS TITLE INSURANCE ACT
Art. 9.01. Short Title and Legislative Purpose and Intent
A. This Act shall be known and may be cited as the "Texas Title
Insurance Act."
B. The Legislature of the State of Texas finds that the business of
title insurance, both the direct issuance of policies and the
reinsurance of any assumed risks, of every type, shall in all
respects be totally regulated by the State of Texas so as to provide
for the protection of every consumer and purchaser of a title
insurance policy and to provide for adequate and reasonable rates
of return for title insurance companies and title insurance agents.
It is the express legislative intent that this Chapter 9 accomplish
such a result.
Amended by Acts 1967, 60th Leg., p. 490, ch. 219, Sec. 1, eff. Oct.
1, 1967; Acts 1975, 64th Leg., p. 1063, ch. 409, Sec. 1, eff. Sept.
1, 1975.
Sec. B amended by Acts 1995, 74th Leg., ch. 127, Sec. 1, eff. Sept.
1, 1995.
Art. 9.02. Definitions
(a) "Title Insurance" means insuring, guaranteeing or indemnifying
owners of real property or others interested therein against loss
or damage suffered by reason of liens, encumbrances upon, or
defects in the title to said property, and the invalidity or
impairment of liens thereon, or doing any business in substance
equivalent to any of the foregoing in a manner designed to evade the
provisions of this Act.
(b) The "business of title insurance" shall be deemed to be (1) the
making as insurer, guarantor or surety, or proposing to make as
insurer, guarantor or surety, of any contract or policy of title
insurance or any equivalent thereof; (2) the transacting or
proposing to transact, any phase of title insurance, including
solicitation, title examination, except when conducted by an
attorney, closing the transaction, except when conducted by an
attorney, execution of a contract of title insurance, insuring and
transacting matters subsequent to the execution of the contract and
arising out of it, including reinsurance; (3) the making of a
guaranty or warranty of a title search, a title examination, or any
component thereof by a person other than the one performing the
search or examination; or (4) the doing, or proposing to do, any
business in substance equivalent to any of the foregoing whether or
not designed to evade the provisions of this Act.
(c) "Title Insurance Company" means any domestic company organized
under the provisions of this Act for the purpose of conducting the
business of title insurance, any title insurance company organized
under the laws of another state or foreign government meeting the
requirements of this Act and holding a certificate of authority to
transact business in Texas and any domestic or foreign company
having a certificate of authority to insure titles to real estate
within this state and which meet the requirements of this Act.
(d) "Commissioner" means the Commissioner of Insurance of the State
of Texas.
(e) "Board" means the State Board of Insurance of the State of
Texas.
(f) "Title Insurance Agent" means a person, firm, association, or
corporation owning or leasing and controlling an abstract plant as
defined by the Board, or as a participant in a bona fide joint
abstract plant operation as defined by the Board, and authorized in
writing by a title insurance company to solicit insurance and
collect premiums and to issue or countersign policies in its
behalf.
(g) "Escrow Officer" means an attorney, or bona fide employee of
either an attorney licensed as an escrow officer, bona fide
employee of a direct operation, or bona fide employee of a title
insurance agent whose duties include any or all of the following:
(1) countersigning title insurance forms; or (2) supervising the
preparation and supervising the delivery of title insurance forms;
or (3) signing escrow checks; or (4) closing the transaction.
(h) "Foreign Title Insurance Company" means a title insurance
company organized under the laws of any jurisdiction other than the
State of Texas.
(i) "Abstract plant" as used herein shall mean a geographical
abstract plant such as is defined by the commissioner, and the
commissioner, in defining an abstract plant, shall require a
geographically arranged plant, currently kept to date, that is
found by the commissioner to be adequate for use in insuring titles,
so as to provide for the safety and protection of the policyholders.
(j) "Residential real property" means any real property which has
improvements thereon and is designed principally for the occupancy
of from one to four families (including individual units of
condominiums and cooperatives).
(k) "Thing of value" includes any payment, advance, funds, loan,
service, or other consideration.
(l ) "Person" includes individuals, corporations, associations,
partnerships and trusts.
(m) "Title Examination" means the search and examination of a title
to determine the conditions of the title to be insured and to
evaluate the risk to be undertaken in the issuance of a title
insurance policy or other title insurance form.
(n) "Closing the Transaction" means the investigation made on
behalf of a title insurance company, title insurance agent, or
direct operation before the actual issuance of the title policy to
determine proper execution, acknowledgment, and delivery of all
conveyances, mortgage papers, and other title instruments which may
be necessary to the consummation of the transaction and includes
the determination that all delinquent taxes are paid, all current
taxes, based on the latest available information, have been
properly prorated between the purchaser and seller in the case of an
owner policy, the consideration has been passed, all proceeds have
been properly disbursed, a final search of the title has been made,
and all necessary papers have been filed for record.
(o) "Premium" means the premium rates promulgated by the Board
pursuant to Article 9.07 of this Code and includes the charges for
title examination and for closing the transaction, whether or not
performed by an attorney, and for issuance of a policy.
(p) "Attorney" means a person licensed to practice law and a member
of the State Bar of Texas and includes a Texas professional
corporation organized for the purpose of rendering professional
legal services.
(q) "Direct Operation" means the operations of a title insurance
company under the authority of a license issued under Article 9.36A
of this Code. Whenever the term "title insurance agent" is used in
this Chapter, it shall be construed to include "direct operation"
unless the context indicates to the contrary.
Amended by Acts 1967, 60th Leg., p. 490, ch. 219, Sec. 1, eff. Oct.
1, 1967; Acts 1975, 64th Leg., p. 1064, ch. 409, Sec. 2, eff. Sept.
1, 1975.
Subsecs. (b), (g) amended and Subsecs. (m) to (q) added by Acts
1987, 70th Leg., ch. 1073, Sec. 3, eff. Sept. 1, 1987; Subsecs.
(a), (i) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 16.01, eff.
Sept. 1, 1993; Subsec. (b) amended by Acts 1995, 74th Leg., ch.
127, Sec. 2, eff. Sept. 1, 1995; Subsec. (c) amended by Acts 1995,
74th Leg., ch. 127, Sec. 3, eff. Sept. 1, 1995; Subsec. (i) amended
by Acts 1995, 74th Leg., ch. 127, Sec. 4, eff. Sept. 1, 1995;
Subsec. (m) amended by Acts 1995, 74th Leg., ch. 127, Sec. 5, eff.
Sept. 1, 1995.
Art. 9.03. May Incorporate
(a) Private corporations may be created and licensed under this
chapter to compile and own or lease, or to acquire and own or lease,
records or abstracts of title to lands and interests in land and to
insure titles to lands or interests therein, both in Texas and other
jurisdictions, and indemnify the owners of such lands, or the
holders of interests in or liens on such lands, against loss or
damage on account of incumbrances upon or defects in the title to
such lands or interests therein; and in transactions in which title
insurance is to be or is being issued, to supervise or approve the
signing of legal instruments (but not the preparation of such
instruments) affecting land titles, disbursement of funds,
prorations, delivery of legal instruments, closing of deals,
issuance of commitments for title insurance specifying the
requirements for title insurance and the defects in title necessary
to be cured or corrected. Nothing herein contained shall authorize
such corporation to practice law, as that term is defined by the
courts of this state, and in the event of any conflict herein, this
clause shall be controlling.
(b) A corporation described by Subsection (a) of this article may
also exercise the following powers by including same in the charter
when filed originally, or by amendment:
(1) To make and sell abstracts of title in any counties of Texas or
other states;
(2) To accumulate and lend money, to purchase, sell or deal in
notes, bonds, and securities, but without banking privileges;
(3) To act as trustee under any lawful trust committed to it by
contract or will, appointment by any court having jurisdiction of
the subject matter as trustee, receiver or guardian and as executor
or guardian under the terms of any will and as any administrator of
the estates of decedents under the appointment of the court.
Amended by Acts 1967, 60th Leg., p. 491, ch. 219, Sec. 1, eff. Oct.
1, 1967.
Amended by Acts 1993, 73rd Leg., ch. 685, Sec. 16.02, eff. Sept. 1,
1993.
Art. 9.04. Governed by Other Laws
The laws governing corporations in general shall apply to and
govern title insurance companies insofar as same are not
inconsistent with the provisions of this Act.
Amended by Acts 1967, 60th Leg., p. 492, ch. 219, Sec. 1, eff. Oct.
1, 1967.
Art. 9.05. Transfer and Assignment of Fiduciary Business to State
Banks or Trust Companies
Sec. 1. Any corporation heretofore chartered under the provisions
of Article 9.03 of this Act, or its antecedents, Article 9.01, Texas
Insurance Code, or Chapter 40, Acts, 41st Legislature, 1929
(codified as Article 1302a, Vernon's Texas Civil Statutes), having
as one of its powers "to act as trustee under any lawful trust
committed to it by contract or will, appointment by any court having
jurisdiction of the subject matter, as trustee, receiver or
guardian and as executor or guardian under the terms of any will and
as any administrator of the estates of decedents under the
appointment of the court" may transfer and assign to a state bank
created under the provisions of Subtitle A, Title 3, Finance Code,
or a predecessor of that law, as amended, or to a state trust
company created under the provisions of Chapter 181, Finance Code,
or a predecessor of that law, as amended, all of its fiduciary
business in which such corporation is named or acting as guardian,
trustee, executor, administrator or in any other fiduciary
capacity, whereupon said state bank or trust company shall, without
the necessity of any judicial action in the courts of the State of
Texas or any action by the creator or beneficiary of such trust or
estate, continue the guardianship, trusteeship, executorship,
administration or other fiduciary relationship, and perform all of
the duties and obligations of such corporation, and exercise all of
the powers and authority relative thereto now being exercised by
such corporation, and provided further that the transfer or
assignment by such corporation of such fiduciary business being
conducted by it under the powers granted in its original charter, as
amended, shall not constitute or be deemed a resignation or refusal
to act upon the part of such corporation as to any such
guardianship, trust, executorship, administration, or any other
fiduciary capacity; and provided further that the naming or
designation by a testator or the creator of a living trust of such
corporation to act as trustee, guardian, executor, or in any other
fiduciary capacity, shall be considered the naming or designation
of the state bank or trust company and authorizing such state bank
or trust company to act in said fiduciary capacity. All transfers
and assignments of fiduciary business by such corporations to a
state bank or trust company consistent with the provisions of this
Act are hereby validated.
Sec. 2. Repealed by Acts 1987, 70th Leg., ch. 1073, Sec. 24, eff.
Sept. 1, 1987.
Amended by Acts 1967, 60th Leg., p. 492, ch. 219, Sec. 1, eff. Oct.
1, 1967.
Sec. 1 amended by Acts 1995, 74th Leg., ch. 914, Sec. 8, eff. Sept.
1, 1995; amended by Acts 1997, 75th Leg., ch. 769, Sec. 4, eff.
Sept. 1, 1997; amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.67,
eff. Sept. 1, 1999.
Art. 9.06. Capital Stock and Surplus Required
Except as provided by Article 9.56, Section 4A of this Chapter 9,
all title insurance companies created and operating under the
provisions of this Chapter must have a paid up capital of not less
than One Million Dollars ($1,000,000) and a surplus of not less than
One Million Dollars ($1,000,000).
Amended by Acts 1967, 60th Leg., p. 493, ch. 219, Sec. 1, eff. Oct.
1, 1967; Acts 1975, 64th Leg., p. 1065, ch. 409, Sec. 3, eff. Sept.
1, 1975.
Amended by Acts 1987, 70th Leg., ch. 1073, Sec. 4, eff. Sept. 1,
1987.
Art. 9.06A. Purchase by Corporation of Own Shares
(a) Subject to Article 9.06 of this Code and the Texas Business
Corporation Act, a title insurance company may purchase its own
shares. A purchase of its own shares is not considered an
investment and does not constitute a violation of the provisions of
this Code relating to admissible investments.
(b) A company that purchases its own shares shall, not later than
the 10th (tenth) day after the date of purchase, file a statement
with the Commissioner of Insurance listing the name of each
shareholder from whom the shares have been purchased and the sum of
money paid for those shares.
Added by Acts 1987, 70th Leg., ch. 1073, Sec. 5, eff. Sept. 1, 1987.
Art. 9.07. Policy Forms and Premiums
(a) Corporations organized under this Chapter, as well as foreign
corporations and those created under Subdivision 57, Article 1302,
of the Revised Civil Statutes of 1925 before the repeal of that
statute, or under Chapter 8 of this Code, or any other law insofar
as the business of either may be the business of title insurance,
shall operate in Texas under the control and supervision and under
such uniform rules and regulations as to forms of policies and
underwriting contracts and premiums therefor, and such
underwriting standards and practices as may be prescribed by the
commissioner; and no Texas or foreign corporation, whether
incorporated under this Chapter or any other law of the State of
Texas, shall be permitted to conduct the business of title
insurance, to issue any title policy of any character, or
underwriting contract, to delete any policy exclusion or to
reinsure any portion of the risk assumed by any title policy, on
Texas real property other than under this Chapter and under such
rules and regulations. No policy of title insurance, title
insurance coverage, reinsurance of any risk assumed under any
policy of title insurance, or any guarantee of any character made
when insuring Texas titles shall be issued or valid unless written
by a corporation complying with the provisions of and authorized or
qualified under this Chapter, except as is provided in Article
9.19D. Before any premium rate provided for herein shall be fixed
or charged, reasonable notice shall issue, and a hearing afforded
to the title insurance companies and title insurance agents
authorized or qualified under this Chapter and the public. Under no
circumstances may any title insurance company or title insurance
agent use any form which is required under the provisions of this
Chapter 9 to be promulgated or approved until the same shall have
been so promulgated or approved by the commissioner.
(b) The commissioner shall have the duty to fix and promulgate the
premium rates to be charged by title insurance companies and title
insurance agents created or operating under this Chapter for
policies of title insurance or other promulgated or approved forms,
and the premiums therefor shall be paid in the due and ordinary
course of business. Premium rates for reinsurance as between title
insurance companies qualified under this Chapter shall not be fixed
or promulgated by the commissioner, and title insurance companies
may set such premium rates for reinsurance as such title insurance
companies shall agree upon. Under no circumstance shall any
premium be charged for any policy of title insurance or other
promulgated or approved forms different from those fixed and
promulgated by the commissioner, except for premiums charged for
reinsurance. The premium rates fixed by the commissioner shall be
reasonable to the public and nonconfiscatory as to the title
insurance companies and title insurance agents. For the purpose of
collecting data on which to determine the proper rates to be fixed,
the commissioner shall require all title insurance companies and
all title insurance agents operating in Texas to submit such
information in such form as the commissioner may deem proper, all
information as to loss experience, expense of operation, and other
material matters for the commissioner's consideration. In fixing
the rate of premiums, the commissioner shall consider all relevant
income and expenses of title insurance companies and title
insurance agents attributable to Texas title insurance business.
(c) The commissioner shall hold a biennial hearing not earlier than
July 1 of each even-numbered calendar year, to consider adoption of
premium rates and such other matters and subjects relative to the
regulation of the business of title insurance as may be requested by
any association, any title insurance company, any title insurance
agent, any member of the public, or as the commissioner may
determine necessary to consider. Any person, association, or
entity recommending adoption of premium rates or other matters and
subjects shall be admitted as a party to the hearing. Not less than
60 days prior to the public hearing, notice of the hearing and the
items to be considered shall be sent direct to all title insurance
companies and title insurance agents qualified or authorized to do
business under this Chapter and to the public in such a manner as to
give fair publicity thereto. The hearing shall consist of a
rulemaking phase for consideration of rules, forms, and
endorsements, and related matters not having rate implications and
a ratemaking phase for consideration of fixing the premium rate and
other matters with rate implications. The commissioner shall
certify which matters have rate implications to be considered in
the ratemaking phase of the hearing. The commissioner shall
conduct both phases of the hearing; provided, however, that the
ratemaking phase of the hearing shall be conducted by the State
Office of Administrative Hearings in accordance with Article 1.33B
of this code at the direction of the commissioner or at the written
request of any person seeking admission as a party to the ratemaking
phase of the hearing. Such request must be made at the time a person
seeks to be admitted as a party to the hearing but in no event more
than 10 days after issuance of public notice of the hearing. The
ratemaking phase of the hearing shall be conducted as a contested
case pursuant to Chapter 2001, Government Code (Administrative
Procedure Act). Presentation by any party of relevant, admissible
oral testimony shall not be limited. All matters in all phases of
the hearing shall be considered by the commissioner and decisions
thereon rendered in open meeting. Changes to the Basic Manual of
Rules, Rates, and Forms for the Writing of Title Insurance in the
State of Texas, including additions or amendments thereto, may be
proposed and adopted by reference by publishing a notice of such
proposal or adoption by reference in the Texas Register. The notice
must include a brief summary of the substance of the matter to be
added or changed and a statement that the full text of the matter is
available for review in the office of the chief clerk of the Texas
Department of Insurance.
(d) Premium rates when once fixed shall not be changed until after a
public hearing shall be had by the commissioner. Not less than 60
days prior to the public hearing, notice of the hearing and the
items to be considered shall be sent direct to all title insurance
companies and title insurance agents qualified or authorized to do
business under this Chapter, and public notice shall be provided in
such manner as to give fair publicity thereto. The commissioner
must call such additional hearings to consider premium rate changes
at the request of a title insurance company or the office of public
insurance counsel.
(e) The commissioner may, on his or her own motion, following notice
as required for the biennial hearing hold at any time a public
hearing to consider adoption of premium rates and such other
matters and subjects relative to the regulation of the business of
title insurance as the commissioner shall determine necessary or
proper.
(f) Any title insurance company, any title insurance agent, or
other person or association of persons interested, feeling injured
by any action of the commissioner with regard to premium rates or
other action taken by the commissioner, shall have the right to
appeal in accordance with Article 1.04 of this code.
Amended by Acts 1967, 60th Leg., p. 493, ch. 219, Sec. 1, eff. Oct.
1, 1967; Acts 1975, 64th Leg., p. 1065, ch. 409, Sec. 4, eff. Sept.
1, 1975.
Amended by Acts 1987, 70th Leg., ch. 1073, Sec. 6, eff. Sept. 1,
1987; Acts 1993, 73rd Leg., ch. 685, Sec. 16.02, eff. Sept. 1,
1993; Acts 1995, 74th Leg., ch. 127, Sec. 6, eff. Sept. 1, 1995.
Art. 9.07A. Policy Forms for Residential Real Property
(a) The board shall adopt an owner policy form to be issued in
connection with transactions involving residential real estate in
this state.
(b) A title insurance company or title insurance agent shall use a
form adopted by the commissioner under this article in issuing
owner policies to natural persons relating to residential real
property in this state.
(c) An insurer may not enter into a contract or agreement concerning
an individual policy that is not expressed in the policy unless
permitted by rules adopted by the board. Such a contract or
agreement is void.
(d) Endorsements promulgated by the board may be attached to the
policy form, provided such an endorsement is in conformity with
rules adopted by the board.
(e) The board may not adopt an owner policy form for residential
real property or any endorsement to the policy if the policy or
endorsement is not in plain language. For the purposes of this
subsection, a policy or endorsement is written in plain language if
it achieves the minimum score established by the commissioner on
the Flesch reading ease test or an equivalent test selected by the
commissioner or, at the option of the commissioner, if it conforms
to the language requirements in a National Association of Insurance
Commissioners model act relating to plain language. This
subsection does not apply to policy language that is mandated by
state or federal law.
(f) For an owner policy on residential real property that is issued
to a natural person, the commissioner may adopt coverages that
insure against:
(1) ad valorem taxes, including penalties and interest, to be paid
with respect to the property for a previous tax year and that are
delinquent on the effective date of the policy because of sale,
diversion, or change of use, unless excluded because the insured
has actual knowledge of the delinquent taxes; and
(2) ad valorem taxes, including penalties and interest, to be paid
with respect to the property for a previous tax year because of an
exemption granted to a previous owner of the property under Section
11.13, Tax Code, or because of improvements not assessed for a
previous tax year, unless excluded because the insured has actual
knowledge of the taxes.
Added by Acts 1991, 72nd Leg., ch. 242, Sec. 2.44, eff. Sept. 1,
1991. Subsec. (b) amended by Acts 1995, 74th Leg., ch. 127, Sec. 7,
eff. Sept. 1, 1995; Subsec. (f) added by Acts 1999, 76th Leg., ch.
1379, Sec. 1, eff. Sept. 1, 1999.
Art. 9.07B. Abstract of Title; Commitment for Title Insurance
Distinguished
(a) An abstract of title prepared from an abstract plant for a chain
of title of real property described in the abstract of title is not
title insurance, a commitment for title insurance, or any other
title insurance form.
(b) The Board may not adopt regulations relating to abstracts of
title.
(c) A "commitment for title insurance" means a title insurance form
that offers to issue a title policy subject to stated exceptions,
requirements, and terms. The term includes a mortgagee title
policy binder on an interim construction loan. The commitment,
binder, title policy, or other insurance form is not an abstract of
title. The commitment or binder constitutes a statement of the
terms and conditions on which the title insurance company is
willing to issue its policy. The title insurance policy or other
insurance form constitutes a statement of the terms and conditions
of the indemnity under the title insurance policy or other form.
Added by Acts 1993, 73rd Leg., ch. 685, Sec. 16.03, eff. Sept. 1,
1993.
Art. 9.07C. Area and Boundary Coverage
(a) In this article, " area and boundary coverage" means title
insurance coverage relating to discrepancies, conflicts, or
shortages in area or boundary lines, or any encroachments or
protrusions, or any overlapping of improvements.
(b) The commissioner may adopt rules allowing a title insurance
company to accept an existing real property survey and not require a
new survey when providing area and boundary coverage if the title
insurance company is willing to accept evidence of an existing real
property survey, and an affidavit verifying the existing survey, as
prescribed by the commissioner, notwithstanding the age of the
survey or the identity of the person for whom the survey was
prepared.
(c) A title insurance company may not discriminate in providing
area and boundary coverage in connection with residential real
property solely because:
(1) the real property is platted or unplatted; or
(2) a municipality did not accept a subdivision plat in relation to
the real property before September 1, 1975.
(d) A title insurance company may not require an indemnity from a
seller, buyer, borrower, or lender to provide area and boundary
coverage.
Added by Acts 2001, 77th Leg., ch. 764, Sec. 1, eff. June 13, 2001.
Art. 9.08. Prohibiting Guarantee of Payment of Obligations of
Others--and "Insuring Around"
Title insurance companies, domestic or foreign, operating under
this chapter shall not have the right to guarantee the payment of
mortgages which cover real estate, and if any such corporation
shall do so it shall forthwith forfeit and surrender its permit to
do business.
"Insuring around" is defined as the willful issuance of a title
binder or title insurance policy showing no outstanding enforceable
recorded liens while the title insurance company knows that in fact
a lien or liens are of record against the real property, and shall
be prohibited, except under circumstances as the commissioner under
his or her rule-making powers shall approve. A title insurance
company knows that an outstanding enforceable recorded matter
exists if it determines that the matter is valid and enforceable
based on the examination of the title pursuant to which the title
binder or title insurance policy is issued. In its discretion, the
title insurance company may determine the insurability of title and
those matters which it considers to be insurable under the title
binder or title insurance policy; provided, however, that insuring
around enforceable recorded liens shall be prohibited except as
allowed by regulation.
Any person who willfully violates the provisions of this Article
9.08, or who disobeys an order of the commissioner refusing to
approve an application to insure around, shall, upon proof thereof
to the satisfaction of the District Court of Travis County, Texas,
forfeit and pay to the State of Texas a sum not to exceed $5,000,
which may be recovered in a civil action by the commissioner.
The commissioner, upon giving thirty (30) days' notice by
registered mail, and upon hearing had for that purpose, may forfeit
the Certificate of Authority to do business of any company
violating the provisions of this Article 9.08.
Amended by Acts 1967, 60th Leg., p. 494, ch. 219, Sec. 1, eff. Oct.
1, 1967.
Amended by Acts 1995, 74th Leg., ch. 127, Sec. 8, eff. Sept. 1,
1995.
Art. 9.09. Prohibiting Transacting of Other Kinds of Insurance by
Title Insurance Companies or the Transacting of Title Insurance by
Other Types of Insurance Companies
Corporations, domestic or foreign, operating under this Chapter
shall not transact, underwrite or issue any kind of insurance other
than title insurance on real property; nor shall the business of
title insurance be transacted, underwritten, or issued by any
company transacting any other kinds of insurance.
Amended by Acts 1967, 60th Leg., p. 494, ch. 219, Sec. 1, eff. Oct.
1, 1967; Acts 1975, 64th Leg., p. 1067, ch. 409, Sec. 5, eff. Sept.
1, 1975.
Amended by Acts 1993, 73rd Leg., ch. 685, Sec. 16.04, eff. Sept. 1,
1993; Acts 1995, 74th Leg., ch. 127, Sec. 9, eff. Sept. 1, 1995.
Art. 9.09A. Prohibiting Unmarketability of Title Insurance
An insurance company may not insure against loss or damage by reason
of unmarketability of title. The commissioner may not promulgate
rules or forms providing for that coverage.
Added by Acts 1993, 73rd Leg., ch. 685, Sec. 16.05, eff. Sept. 1,
1993.
Art. 9.10. Foreign Corporations
Corporations organized under the laws of any other state shall be
permitted to do business in this state on exactly the same basis and
subject to the same rules, regulations and prices and supervision
as fixed for Texas corporations doing business under this Act.
Amended by Acts 1967, 60th Leg., p. 495, ch. 219, Sec. 1, eff. Oct.
1, 1967.
Art. 9.11. Revocation of Right to do Business
Any foreign or domestic corporations conducting the business of
title insurance or issuing any form of title insurance policy or
other promulgated or approved forms, or charging any premium rates
on an owner, mortgagee, or other title insurance policy, or on other
promulgated or approved forms, except for the premium rates charged
for reinsurance, on Texas real property other than forms and
premium rates prescribed by the commissioner, under the provisions
of this Chapter shall forfeit its right to do business in this
state. The provisions of this Article 9.11 shall not, however, be
applicable to premium rates charged in connection with reinsurance
transactions between or among title insurance companies doing
business under the provisions of this Chapter, provided any such
reinsurance contract complies with the provisions of Article 9.19
of this Chapter.
Amended by Acts 1967, 60th Leg., p. 495, ch. 219, Sec. 1, eff. Oct.
1, 1967; Acts 1975, 64th Leg., p. 1067, ch. 409, Sec. 6, eff. Sept.
1, 1975.
Amended by Acts 1995, 74th Leg., ch. 127, Sec. 10, eff. Sept. 1,
1995.
Art. 9.12. Deposits
All title insurance companies, domestic and foreign, engaged in the
title insurance business must at all times have and keep on deposit
with the State Treasury or such other depository in the State of
Texas as may be named by such corporation and approved by the Board,
either cash or such securities as are listed in Article 9.18 of this
Act as approved investments for title insurance companies, to an
amount equal to one-fourth of the authorized capital of such
corporation; provided, however, that such deposit shall in no
event exceed the sum of One Hundred Thousand Dollars ($100,000).
Such corporation, at its option may withdraw from time to time such
securities or any part thereof, first having deposited in such
depository in lieu thereof other securities of sufficient value to
maintain the required deposit. Funds deposited under this
provision shall never be used for the payment of any obligation
other than those connected with title insurance, and in the event of
the insolvency or dissolution of a corporation, the fund hereby
provided shall be used to protect title insurance policyholders
even though there be no accrued title insurance claims and even
though there be unpaid obligations of other sorts; provided,
however, that same shall be applied to the payment of other
obligations and liabilities of said corporation and/or
distribution to stockholders after complete payment of the
obligations and liabilities of the corporation connected with title
insurance business and the establishment of adequate reserves or
reinsurance for the protection of any subsequently accruing or
maturing title insurance obligations and liabilities, the amount of
such reserves and the handling and distribution of same to be
subject to the control and discretion of the Board, same to be
reviewable in judicial proceedings to be governed by like rules as
are applicable to review of rates under Article 9.07 of this Act.
This deposit shall be for the benefit of all policyholders.
If a foreign title insurance company has on deposit with insurance
regulatory bodies in the United States sums aggregating the amount
of deposit required by this Article in such manner as to secure all
policyholders wherever located, then no deposit shall be required
in this state, but a certificate of deposit under the hand and seal
of such insurance regulatory body or bodies with whom the deposits
have been made shall be filed with the Board.
Amended by Acts 1967, 60th Leg., p. 495, ch. 219, Sec. 1, eff. Oct.
1, 1967.
Art. 9.13. Fees
The general laws applicable to payment of filing fees of
corporations having capital stock are hereby made applicable to
corporations coming under the provisions of this Chapter.
Amended by Acts 1967, 60th Leg., p. 495, ch. 219, Sec. 1, eff. Oct.
1, 1967; Acts 1975, 64th Leg., p. 1067, ch. 409, Sec. 7, eff. Sept.
1, 1975.
Art. 9.14. Charter and Amendments
The original charter of corporations doing the business of title
insurance and incorporated under the provisions of this Chapter, or
under Subdivision 57, Article 1302, Revised Civil Statutes of 1925,
or under Article 1302a, Texas Civil Statutes (Acts 1929, 41st
Legislature, page 383, Chapter 245, Section 1) or under any other
law regardless of the nature of such amendment, shall be certified
only to and filed only with the Board, and only the Board shall
collect from the said companies filing fees required under the law.
All other laws or parts of laws, to the extent that the same are in
conflict with the provisions of this Article, shall not hereafter
apply to such corporations.
Amended by Acts 1967, 60th Leg., p. 496, ch. 219, Sec. 1, eff. Oct.
1, 1967; Acts 1975, 64th Leg., p. 1068, ch. 409, Sec. 8, eff. Sept.
1, 1975.
Art. 9.15. Certificate of Authority
The Board after having satisfied itself by such investigation as it
may deem proper with reference to the payment of capital stock and
surplus as required by this Chapter 9, and the value of the assets
offered in payment thereof (the expense of which examination shall
be borne by the title insurance company), shall issue to such title
insurance company a certificate of authority to transact the
characters of business provided for in this Chapter on either an
annual or a continuing basis. No title insurance company, domestic
or foreign, shall transact business under this Chapter unless it
shall hold a valid certificate of authority.
Amended by Acts 1967, 60th Leg., p. 496, ch. 219, Sec. 1, eff. Oct.
1, 1967; Acts 1975, 64th Leg., p. 1068, ch. 409, Sec. 9, eff. Sept.
1, 1975.
Art. 9.16. Reserves
Article repealed effective April 1, 2005.
Statutory premium reserve required
Sec. 1. (a) Each domestic title insurer doing a title insurance
business under this chapter shall establish and maintain a
statutory premium reserve during the period and for the uses and
purposes provided by this article, which shall at all times and for
all purposes be deemed and shall constitute unearned portions of
the original premium, and shall be charged as a reserve liability of
that insurer in determining its financial condition.
(b) The reserve required under Subsection (a) of this section shall
be cumulative. The reserve shall be established and shall consist
of the amounts required under this article.
Amounts added to reserve for calendar year 1997; reductions
Sec. 2. (a) The total charges of a domestic title insurer for title
insurance policies written or assumed on or after January 1, 1997,
but before January 1, 1998, are computed by adding the following, as
set forth in the title insurer's annual statement:
(1) the direct premium written by the title insurer;
(2) the escrow and settlement service fees paid directly to and
collected by the title insurer;
(3) other title fees and service charges paid directly to and
collected by the title insurer, including fees for closing
protection letters; and
(4) premiums for reinsurance assumed less premiums for reinsurance
ceded during the year.
(b) The amount a domestic title insurer must set aside in the
statutory premium reserve for the 1997 calendar year is computed by
multiplying the total charges computed under Subsection (a) of this
section by:
(1) 6-2/10 percent if the insurer had $250 million or more in direct
premium written for the year 1996; or
(2) 3-1/2 percent if the insurer had less than $250 million in
direct premium written for the year 1996.
(c) Additions to the statutory premium reserve set aside for title
insurance policies written or assumed during 1997 shall be reduced
over a 20-year period beginning in the year after the year in which
the policies are written or assumed, as provided by Subsection (d)
of this section, by:
(1) 26 percent of the additions in the first year succeeding the
year of addition;
(2) 20 percent of the additions in the second succeeding year;
(3) 10 percent of the additions in the third succeeding year;
(4) nine percent of the additions in the fourth succeeding year;
(5) five percent of the additions in the fifth and sixth succeeding
years;
(6) three percent of the additions in the seventh, eighth, and ninth
succeeding years;
(7) two percent of the additions in the 10th through 14th succeeding
years; and
(8) one percent of the additions in the last six years.
(d) The annual reductions under Subsection (c) of this section
shall be made in increments of one-fourth of the appropriate
percentage of the additions each on March 31, June 30, September 30,
and December 31 of each year.
Amounts added to reserve in calendar years after 1997; reductions
Sec. 3. (a) Out of total charges for title insurance policies
written or assumed on or after January 1, 1998, a domestic title
insurer shall add to and set aside in the statutory premium reserve
an amount equal to the total of the following as set forth in the
title insurer's annual statement:
(1) $0.25 per $1,000 of net retained liability if the insurer had
$250 million or more in direct written premiums written for the most
recent calendar year; or
(2) $0.30 per $1,000 of net retained liability if the insurer had
less than $250 million in direct written premiums written for the
most recent calendar year.
(b) Additions to the statutory premium reserve set aside for title
insurance policies written or assumed after 1997 shall be reduced
over a 20-year period beginning in the year after the year in which
the policies are written or assumed in the manner and under the same
percentages applied under Sections 2(c) and (d) of this article.
Transitional release; transitional charge
Sec. 4. (a) In addition to the requirements imposed under Sections 2
and 3 of this article, each domestic title insurer shall compute a
total statutory premium reserve balance for all policy years
combined as of December 31, 1996.
(b) The balance under Subsection (a) of this section shall be
computed as if Section 2 of this article were in effect during the
20-year period ending December 31, 1996. That balance, less the
total actual statutory premium reserve balance carried by the
insurer on December 31, 1996, is the insurer's transitional charge
if the resulting amount is greater than zero or is the insurer's
transitional release if the resulting amount is zero or less.
(c) If the domestic title insurer has a transitional charge under
Subsection (b) of this section, in addition to the changes to the
statutory premium reserve otherwise required by this article, the
domestic title insurer shall add to its statutory premium reserve,
on December 31 of each year for 10 consecutive years beginning on
December 31, 1997, an amount equal to one-tenth of the transitional
charge.
(d) If the domestic title insurer has a transitional release under
Subsection (b) of this section, in addition to the changes to
statutory premium reserve otherwise required by this article, the
domestic title insurer shall reduce its statutory premium reserve,
on December 31 of each year for 10 consecutive years beginning on
December 31, 1997, by an amount equal to one-tenth of the
transitional release.
Runoff balance
Sec. 5. (a) At the end of each calendar year beginning in 1997, each
domestic title insurer shall also compute a total statutory premium
reserve balance for all policy years before January 1, 1997,
combined. That balance shall be computed as of the year-end
evaluation date and as if Section 2 of this article were in effect
during the 20-year period ending December 31, 1996. The balance
computed under this subsection is the runoff balance.
(b) The title insurer shall reduce its statutory premium reserve by
an amount equal to the difference between the runoff balance
computed under Subsection (a) of this section and the runoff
balance computed for the preceding calendar year.
(c) The reduction of the statutory premium reserve under Subsection
(b) of this section is in addition to any other changes to the
statutory premium reserve required by this article.
Actuarial certification
Sec. 6. (a) Each domestic and foreign title insurer shall file
annually with the annual statement required under Article 9.22 of
this code an actuarial certification made by a member in good
standing of the American Academy of Actuaries.
(b) The actuarial certification must conform to the annual
statement instructions for title insurers adopted by the National
Association of Insurance Commissioners and must include the
actuary's professional opinion of the insurer's reserves as of the
date of the annual statement. The reserves analyzed under this
section must include reserves for known claims, including adverse
development on known claims, and reserves for incurred but not
reported claims.
Supplemental reserve
Sec. 7. (a) Each domestic and foreign title insurer shall establish
a supplemental reserve in the amount by which the actuarially
certified reserves exceed the total of the known claim reserve and
statutory premium reserve as set forth in the title insurer's
annual statement, subject to Subsection (b) of this section.
(b) The supplemental reserve required under this section shall be
phased in as follows:
(1) 25 percent of the otherwise applicable supplemental reserve is
required until December 31, 1996;
(2) 50 percent of the otherwise applicable supplemental reserve is
required until December 31, 1997;
(3) 75 percent of the otherwise applicable supplemental reserve is
required until December 31, 1998; and
(4) 100 percent of the supplemental reserve is required after
December 31, 1998.
Foreign companies
Sec. 8. A foreign title insurer doing business in this state shall
be required to comply with the provisions of Section 6 and Section 7
of this article.
Reevaluation of reserve requirements
Sec. 9. The commissioner may reevaluate the adequacy of the
statutory premium reserves required under Section 3 of this article
and may make recommendations for legislative changes as the
commissioner considers appropriate.
Maintenance of fund
Sec. 10. The statutory premium reserve and supplemental reserve
fund shall be held in cash or invested in first mortgage notes or
other securities admissible for investment by title insurers under
Article 9.18 of this code .
Effect of insolvency or dissolution
Sec. 11. In the event of the insolvency or dissolution of a title
insurer, the statutory premium reserve and supplemental reserve
fund shall be used to protect title insurance contract holders,
even if there are no accrued title insurance claims and even if
there are unpaid obligations of other types.
Amended by Acts 1967, 60th Leg., p. 496, ch. 219, Sec. 1, eff. Oct.
1, 1967.
Subsecs. (2), (4) amended by Acts 1987, 70th Leg., ch. 1073, Sec. 7,
eff. Sept. 1, 1987; Subsec. (2) amended by Acts 1995, 74th Leg.,
ch. 898, Sec. 3, eff. Aug. 28, 1995. Amended by Acts 1997, 75th
Leg., ch. 360, Sec. 1, eff. May 27, 1997.
Art. 9.17. Reserve for Unpaid Losses and Loss Expenses
(a) All title insurance companies operating under the provisions of
this Act shall at all times establish and maintain, in addition to
other reserves, a reserve against (1) unpaid losses, and (2) loss
expense for costs of defense of the insured and other costs expected
to be paid to other parties in the defense, settlement, or
processing of the claim under the terms of the title insurance
policy, and shall calculate such reserves by making a careful
estimate in each case of the loss and loss expense likely to be
incurred, by reason of every claim presented, pursuant to notice
from or on behalf of the insured, of a title defect in or lien or
adverse claim against the title insured, that may result in a loss
or cause expense to be incurred for the proper disposition of the
claim. The sums of items so estimated for payment of loss and costs
of defense of the insured and other costs expected to be paid to
other parties in the defense, settlement, or processing under the
terms of the title insurance policy shall be the total expenses of
such title insurance company.
(b) The amounts so estimated may be revised from time to time as
circumstances warrant, but shall be redetermined at least once each
year.
(c) The amounts set aside in such reserve in any year shall be
deducted in determining the net profits for such year of any title
insurance company.
Amended by Acts 1967, 60th Leg., p. 497, ch. 219, Sec. 1, eff. Oct.
1, 1967.
Subsec. (a) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 16.06,
eff. Sept. 1, 1993.
Art. 9.18. Admissible Investments for Title Insurance Companies
Investments of all title insurance companies operating under the
provisions of this Act shall be held in cash or may be invested in
the following:
(a) Any corporation organized under this Act having the right to do
a title insurance business may invest as much as 50 percent of its
capital stock in an abstract plant or plants, provided that the
valuation to be placed upon such plant or plants shall be approved
by the Board; provided, however, that if such corporation
maintains with the Board the deposit of One Hundred Thousand
Dollars ($100,000) in securities as provided in Article 9.12 of
this Act, such of its capital in excess of 50 percent, as deemed
necessary to its business by its board of directors may be invested
in abstract plants; and provided further, that a corporation
created or operating under the provisions of this Act may own or
acquire more than one abstract plant in any one county but only one
abstract plant in any one county is admissible as an investment.
(b) Those securities set forth in Article 3.39, Insurance Code, and
in authorized investments for title insurance companies under the
laws of any other state in which the affected company may be
authorized to do business from time to time.
(c) Real estate or any interest therein which may be:
(1) required for its convenient accommodation in the transaction of
its business with reasonable regard to future needs;
(2) acquired in connection with a claim under a policy of title
insurance;
(3) acquired in satisfaction or on account of loans, mortgages,
liens, judgments or decrees, previously owing to it in the course of
its business;
(4) acquired in part payment of the consideration of the sale of
real property owned by it if the transaction shall result in a net
reduction in the company's investment in real estate;
(5) reasonably necessary for the purpose of maintaining or
enhancing the sale value of real property previously acquired or
held by it under Subparagraphs (1), (2), (3) or (4) of this Section;
provided, however, that no title insurance company shall hold any
real estate acquired under Subparagraphs (2), (3) or (4) for more
than ten (10) years without written approval of the Board.
(d) First mortgage notes secured by:
(1) abstract plants and connected personalty within or without the
State of Texas;
(2) stock of title insurance agents within or without the State of
Texas;
(3) construction contract or contracts for the purpose of building
an abstract plant and connected personalty;
(4) any combination of two or more of items (1), (2), and (3).
In no event shall the amount of any first mortgage note exceed 80
percent of the appraised value of the security for such note as set
out above.
(e) The shares of any federal home loan bank in the amount necessary
to qualify for membership and any additional amounts approved by
the Commissioner.
(f) Investments in foreign securities that are substantially of the
same kinds, classes, and investment-grade as those eligible for
investment under other provisions of this Article. Unless the
investment is also authorized under Subsection (b) of this Article
the aggregate amount of foreign investments made under this Section
may not exceed:
(1) five percent of the insurer's admitted assets at the last year
end;
(2) two percent of the insurer's admitted assets at the last year
end invested in the securities of all entities domiciled in any one
foreign country; and
(3) one-half of one percent of the insurer's admitted assets at the
last year end invested in the securities of any one individual
entity domiciled in a foreign country.
Any investments which do not qualify under this Article and which
were owned by the title insurance company on October 1, 1967,
continue to qualify.
If any otherwise valid investment which qualifies under the
provisions of this Article shall exceed in amount any of the
limitations on investment contained in this Article, it shall be
inadmissible only to the extent that it exceeds such limitation.
(g) Securities Lending, Repurchase, Reverse Repurchase and Dollar
Roll Transactions as provided for in Section 4(q), Article 3.33, of
this code and Money Market Funds as provided for in Section 4(s),
Article 3.33, of this code.
Amended by Acts 1967, 60th Leg., p. 498, ch. 219, Sec. 1, eff. Oct.
1, 1967.
Amended by Acts 1987, 70th Leg., ch. 1073, Sec. 8, eff. Sept. 1,
1987; Acts 1993, 73rd Leg., ch. 685, Sec. 16.07, eff. Sept. 1,
1993; Acts 1997, 75th Leg., ch. 556, Sec. 8, eff. Sept. 1, 1997.
Art. 9.19. Maximum Liability
A. No title insurance company operating under the provisions of
this Chapter shall issue any policy of title insurance on any real
property located within the State of Texas involving a potential
liability by virtue of such policy of more than fifty (50%) percent
of the capital stock and surplus as stated in the most recent annual
statement of the company unless the excess shall in due course be
reinsured in some other title insurance company authorized to do
business in Texas under this Chapter. Each title insurance company
authorized to do business under the provisions of this Chapter may
reinsure any or all of its policies and contracts issued on real
property situated within the State of Texas, provided: (i) the
reinsuring title insurance company shall be licensed to do business
in the State of Texas under the provisions of this Chapter; and
(ii) the form of the reinsurance contract shall be approved in
advance by the Board.
B. If the Board has first approved one or more forms of reinsurance
contracts for a title insurance company, such title insurance
company may thereafter continue using such form or forms without
submitting individual reinsurance contracts to the Board.
Authority is reserved to the Board, however, to alter the required
form so previously approved by it after first giving written notice
to the title insurance company or title insurance companies
affected by such required change.
C. No title insurance company authorized to do business in Texas
under the provisions of this Chapter may accept reinsurance risks
on real property situated within the State of Texas except from
other title insurance companies holding a certificate of authority
to do business in the State of Texas under the provisions of this
Chapter.
D. The Board may, however, upon application and hearing permit any
title insurance company licensed to do business in this State under
this Chapter to acquire reinsurance upon an individual policy or
facultative basis from title insurance companies not licensed to do
business in this State, provided: (i) any such non-admitted
foreign title insurance company has a combined capital and surplus
of at least $1,400,000 evidenced by its annual statement last
preceding the acceptance of such reinsurance; and (ii) any such
title insurance company so authorized to do business under this
Chapter has exhausted the opportunity to acquire such reinsurance
from all other title insurance companies so authorized to do
business under the provisions of this Chapter.
E. The board may, however, upon application and hearing, permit any
title insurance company licensed to do business in this state under
this chapter and any title insurance company authorized to reinsure
pursuant to the provisions of this chapter to retain an additional
potential liability of not more than 40 percent of the capital stock
and surplus as stated in the most recent annual statement of the
company, provided: (i) the title insurance company so authorized
to do business under this chapter has exhausted the opportunity to
acquire reinsurance pursuant to Section D of this article; and (ii)
the additional potential liability is incurred only if the loss
suffered by the insured or insureds under the policy or policies,
and for which the insurer becomes liable, exceeds the amount of
insurance and reinsurance authorized and accepted by the insurer
and other title insurance companies pursuant to the provisions of
Sections A, B, C, and D of this article.
Amended by Acts 1967, 60th Leg., p. 498, ch. 219, Sec. 1, eff. Oct.
1, 1967; Acts 1975, 64th Leg., p. 1068, ch. 409, Sec. 10, eff. Sept.
1, 1975.
Sec. E added by Acts 1983, 68th Leg., p. 1113, ch. 253, Sec. 1, eff.
Aug. 29, 1983.
Art. 9.20. Capital Stock and Minimum Surplus Impairment
The capital stock and minimum surplus requirement of every title
insurance company, domestic or foreign, operating under the
provisions of the Act must be maintained intact over and above all
its outstanding liabilities, except contingent liabilities on
policies of title insurance, and if such company shall suffer the
impairment of its capital stock, or minimum surplus requirements it
shall report such impairment forthwith to the Board.
Amended by Acts 1967, 60th Leg., p. 499, ch. 219, Sec. 1, eff. Oct.
1, 1967.
Art. 9.21. Authority of Board of Insurance of the State of Texas
(a) If any company operating under the provisions of this Act shall
engage in the characters of business described in Subdivisions (1)
and (2) of Article 9.03 of this Act, in such manner as might bring it
within the provision of any other regulatory statute now or
hereafter to be in force within the State of Texas, all examination
and regulation shall be exercised by the Board rather than any other
state agency which may be named in such other laws, so long as such
corporation engages in the title guaranty or insurance business.
(b) The Board is hereby vested with power and authority under this
Act to promulgate and enforce rules and regulations prescribing
underwriting standards and practices upon which title insurance
contracts are to be issued, and is hereby further vested with the
power and authority to define risks which may not be assumed under
title insurance contracts, including risks that may not be assumed
because of the insolvency of the parties to the transaction. In
addition, the Board is hereby vested with power and authority to
promulgate and enforce all other such rules and regulations which
in the discretion of the Board are deemed necessary to accomplish
the purposes of this Act.
Amended by Acts 1967, 60th Leg., p. 499, ch. 219, Sec. 1, eff. Oct.
1, 1967.
Amended by Acts 1993, 73rd Leg., ch. 685, Sec. 16.07, eff. Sept. 1,
1993.
Art. 9.22. Annual Statement of Title Insurance Companies;
Examination
(a) Every title insurance company, domestic and foreign, operating
under the provisions of this Act shall, on or before the first of
March every year, file with the commissioner a verified statement,
in such form as the commissioner may require, setting forth the
statement of the business done by it during the preceding year, and
the condition of its affairs as of December 31st preceding.
(b) Each title insurance company is subject to Articles 1.15 and
1.16 of this code.
Amended by Acts 1967, 60th Leg., p. 499, ch. 219, Sec. 1, eff. Oct.
1, 1967.
Amended by Acts 1997, 75th Leg., ch. 879, Sec. 1, eff. Sept. 1,
1997.
Art. 9.23. Regulating of Names
Corporations chartered or operating under the provisions of this
Act may use in their corporate name the words "Title and Trust
Company" but they shall not use the word "Trust" alone, and where
the word "Trust" appears, when in letterheads and literature used
by them, they shall print the words "Without Banking Privileges."
Amended by Acts 1967, 60th Leg., p. 500, ch. 219, Sec. 1, eff. Oct.
1, 1967.
Art. 9.24. Foreign Corporations; Permits
Any foreign corporations desiring to transact the character of
business provided for in this Act in this state shall make an
application for permit or certificate of authority to the Board in
such form as the Board shall prescribe and shall submit a financial
statement showing its condition in such form as the Board shall
prescribe.
Amended by Acts 1967, 60th Leg., p. 500, ch. 219, Sec. 1, eff. Oct.
1, 1967.
Art. 9.25. Capital and Surplus Required; Foreign Corporations
No foreign corporation shall conduct the business of title
insurance in this state unless it shall show from its financial
statement and such other examination as the Board may desire to
make, an unimpaired capital of not less than One Million Dollars
($1,000,000.00) and surplus of not less than One Million Dollars
($1,000,000.00).
Amended by Acts 1967, 60th Leg., p. 500, ch. 219, Sec. 1, eff. Oct.
1, 1967; Acts 1975, 64th Leg., p. 1069, ch. 409, Sec. 11, eff. Sept.
1, 1975.
Amended by Acts 1987, 70th Leg., ch. 1073, Sec. 8, eff. Sept. 1,
1987.
Art. 9.28. Authority Revoked; When
If any corporation, domestic or foreign, while holding a
certificate of authority to transact business in this state, shall
fail or refuse to comply with any of the provisions or requirements
of this Chapter, the Board, upon ascertaining this fact, shall
notify such company by actual notice in writing delivered to an
executive officer of such company, of his intention to revoke its
certificate of authority to transact business in this state at the
expiration of thirty (30) days after the mailing of such registered
letter, or the date upon which such actual notice is served. If
such provisions or requirements are not fully complied with upon
the expiration of said thirty (30) days, it shall be the duty of the
Board to revoke the certificate of authority of such company. In
case of such revocation, such company shall not be entitled to
receive another certificate of authority for a period of one year,
and until it shall have fully and in good faith complied with all
such provisions and requirements of this Chapter. Any company
feeling itself aggrieved by the action of the Board in revoking its
certificate of authority to do business in this state may bring suit
against it in Travis County, Texas, to annul and vacate the order
revoking such certificate.
Added by Acts 1967, 60th Leg., p. 501, ch. 219, Sec. 1, eff. Oct. 1,
1967.
Art. 9.29. Supervision, Conservation and Liquidation of Title
Insurance Companies
Articles 21.28 and 21.28-A of this code apply to title insurance
companies, title insurance agents, and other companies doing a
title insurance business in this state.
Added by Acts 1967, 60th Leg., p. 501, ch. 219, Sec. 1, eff. Oct. 1,
1967.
Amended by Acts 1987, 70th Leg., ch. 1073, Sec. 1, eff. Sept. 1,
1987.
Art. 9.30. Rebates and Discounts
A. No commission, rebate, discount, portion of any title insurance
premium, or other thing of value shall be directly or indirectly
paid, allowed or permitted by any person doing the business of title
insurance or received or accepted by any person for doing the
business of title insurance or for soliciting or referring title
insurance business.
B. This Article may not be construed as prohibiting:
(1) a foreign or domestic title insurance company doing business in
this state under this Chapter, from appointing as its title
insurance agent pursuant to this Chapter a person owning or leasing
and operating an abstract plant of such county and making the
arrangement for division of premiums with the agent as shall be set
by the commissioner;
(2) payments for services actually performed by a title insurance
company, a title insurance agent, or a direct operation, in
connection with closing the transaction, furnishing of title
evidence, or title examination, which payment may not exceed the
percentages of the premium or amounts established by the
commissioner for those payments; or
(3) payment of bona fide compensation to a bona fide employee
principally employed by a title insurance company, direct
operation, title insurance agent, or other reasonable payment for
goods or facilities actually furnished and received; or
(4) payments for services actually performed by an attorney in
connection with title examination or closing a transaction, which
payment may not exceed a reasonable charge for such services.
(5) Nothing in this article shall affect the division of premium
between a title insurance company and its subsidiary title
insurance agent when the title insurance company directly issues
its policy or contract of title insurance pursuant to Article 9.34.
For purposes of this provision, a subsidiary is a company at least
50 percent of the voting stock of which is owned by the title
insurance company or by a wholly owned subsidiary of the title
insurance company.
(6) legal promotional and educational activities that are not
conditioned on the referral of title insurance business.
C. A person receiving any form of compensation under Section B(2) of
this Article must be licensed as provided for under this Chapter.
D. The payment or receipt of a commission, rebate, discount, or
other thing of value to or by any person for soliciting or referring
title insurance business in violation of this Article is engaging
in the unauthorized business of insurance, and in addition to any
other penalty, after notice and opportunity for hearing, is subject
to a monetary forfeiture not less than the value nor more than three
times the value of the commission, rebate, discount, or other thing
of value.
E. No person shall give and no person shall accept any portion,
split, or percentage of any charge made or received for the
rendering of a real estate settlement or closing in connection with
a transaction involving the conveyance or mortgaging of real estate
located in the State of Texas other than for services actually
performed.
Added by Acts 1967, 60th Leg., p. 504, ch. 219, Sec. 1, eff. Oct. 1,
1967. Amended by Acts 1975, 64th Leg., p. 1069, ch. 409, Sec. 12,
eff. Sept. 1, 1975.
Amended by Acts 1987, 70th Leg., ch. 1073, Sec. 8, eff. Sept. 1,
1987; Sec. B(5) added by Acts 1991, 72nd Leg., ch. 242, Sec. 2.53,
eff. Sept. 1, 1991; Sec. B amended by Acts 1995, 74th Leg., ch. 127,
Sec. 11, eff. Sept. 1, 1995.
Art. 9.31. Fees and Occupation Tax on Foreign Corporations
Any corporation organized and incorporated under the laws of any
other state, territory or country for the purpose of transacting a
title insurance or title guaranty business shall be required to pay
the same filing fees and occupation tax as any foreign casualty
company is required to pay in order to procure a permit to do
business in Texas. Such foreign title companies will not be
required to pay a franchise tax.
Added by Acts 1967, 60th Leg., p. 505, ch. 219, Sec. 1, eff. Oct. 1,
1967.
Art. 9.32. Prohibiting Further Chartering of Corporations Under
Article 1302
No corporation shall be chartered under Subdivision 57, Article
1302, Revised Statutes of Texas, 1925, but all corporations
heretofore incorporated and now doing business in Texas shall be
permitted to continue in business and shall be subject to all the
provisions of this Act, and such companies shall be required to
comply with the requirements of this Act with reference to
investments and deposits.
Stockholders in a company acting under this Act shall not be liable
in the event of default in the payment of any debt or liability of
such company beyond their subscription for such stock.
Added by Acts 1967, 60th Leg., p. 505, ch. 219, Sec. 1, eff. Oct. 1,
1967.
Art. 9.33. To Cancel License; Appeals by Companies
(a) The terms and provisions of this Act are conditions upon which
corporations doing the business provided for in this Act may
continue to exist, and failure to comply with any of them or a
violation of any of the terms of this Act shall be proper cause for
revocation of the permit and forfeiture of charter of a domestic
corporation or the permit of a foreign corporation.
(b) Any company qualified or seeking to qualify under this Act,
feeling aggrieved by any action of the Board, especially, but not
limited to, any action against such company, shall have the right to
file a suit in the District Court of Travis County, within thirty
(30) days after the Board has made its order or ruling; provided,
however, that if the order or ruling is directed against such
company, whether or not directed against other companies, such
company shall have thirty (30) days after receipt of official
notice of such ruling from the Board to review such action of the
Board. Such cases shall be subject to the same standard of review
as other appeals under this code in accordance with Article 1.04 of
this code.
Added by Acts 1967, 60th Leg., p. 505, ch. 219, Sec. 1, eff. Oct. 1,
1967.
Amended by Acts 1993, 73rd Leg., ch. 685, Sec. 4.04, eff. Sept. 1,
1993.
Art. 9.34. Determination of Insurability
No policy or contract of title insurance shall be written unless (1)
there has been compliance with the provisions of Article 9.30(B),
(2) said policy or contract of title insurance is based on an
examination of title made from title evidence prepared from an
abstract plant owned, or leased and operated by a licensed Texas
title insurance agent or direct operation for the county in which
the real property is located, (3) there has been made a
determination of insurability of title in accordance with sound
title underwriting practices, and (4) evidence thereof shall be
preserved and retained in the files of the title insurance company,
direct operation, or title insurance agent for a period of not less
than fifteen (15) years after the policy or contract of title
insurance has been issued. If no licensed title insurance agent or
direct operation exists for the county in which the real property is
located, a title insurance company may directly issue its policy of
title insurance based on the best title evidence available. If all
licensed title insurance agents and direct operations for the
county refuse to provide the title evidence within such reasonable
time as determined by the Board, and in compliance with the
provisions of Article 9.30(B)(2), the title insurance company may
directly issue its policy if the title insurance company obtains
the best title evidence available. The licensed Texas title
insurance agent or direct operation which provided the title
evidence on which the policies or contracts of title insurance are
issued shall be provided with legible complete copies of all
policies or contracts of title insurance actually issued in the
transactions within a reasonable period of time as determined by
the Board. This Article shall not apply to (a) a company assuming
no primary liability in a contract of reinsurance, or (b) a company
acting as a co-insurer if one of the other co-insuring companies has
complied with this Article.
Added by Acts 1967, 60th Leg., p. 505, ch. 219, Sec. 1, eff. Oct. 1,
1967.
Amended by Acts 1985, 69th Leg., ch. 56, Sec. 1, eff. Aug. 26, 1985;
Acts 1987, 70th Leg., ch. 1073, Sec. 8, eff. Sept. 1, 1987.
Art. 9.35. Requirements for Agents
No person, firm, association or corporation shall act within this
state as agent for any title insurance company, domestic or
foreign, without first having been (1) licensed as an agent by the
Board and (2) filing a bond or cash deposit in lieu thereof as
required in Article 9.38; and no title insurance company shall
allow or permit any person, firm, association or corporation to act
as its agent within the state unless said person, firm, association
or corporation shall first have obtained a license, and filed a bond
as required by this Act.
Added by Acts 1967, 60th Leg., p. 506, ch. 219, Sec. 1, eff. Oct. 1,
1967.
Art. 9.36. Agent's License: Application, Issuance, Renewal, and
Cancellation
Sec. 1. (a) Before an initial license is issued to any person, firm,
association or corporation to act as an agent within the State of
Texas for any title insurance company, there shall first be filed by
the title insurance company with the Board an application for
agent's license, on forms to be provided by the Board, accompanied
by a nonrefundable license fee in an amount not to exceed Fifty
Dollars ($50) as determined by the Board, which fee including
license renewal fees shall be deposited in the state treasury to the
credit of the State Board of Insurance operating fund to be used by
the State Board of Insurance to enforce the provisions of this
article and all laws of this state governing and regulating title
agents for such insurance companies. The application shall be
signed and duly sworn to by the title insurance company and the
proposed agent. Such application shall contain the following:
(1) That the proposed agent, if an individual, is a bona fide
resident of Texas; or if a firm or association, that it is composed
wholly of Texas residents; or if a corporation, that it is a Texas
corporation or a foreign corporation which has been authorized to
do business in Texas; and
(2) That the proposed agent (and if a corporation, its managerial
personnel) has reasonable experience or instruction in the field of
title insurance; and
(3) That the proposed agent is known to the title insurance company
to have a good business reputation and is worthy of the public trust
and said title insurance company knows of no fact or condition which
would disqualify the agent from receiving a license; and
(4) That the proposed agent qualified as a title insurance agent as
defined in this Act.
(b) The Board shall grant such license if it determines from the
application and its own investigation that the foregoing
requirements have been met.
(c) The Commissioner shall collect in advance from agents
requesting duplicate licenses a fee not to exceed $20. The State
Board of Insurance shall determine the amount of the fee.
Sec. 2. (a) To renew a license, an agent shall file a completed
application for renewal on a form prescribed by the Board and pay a
nonrefundable license renewal fee in an amount not to exceed $50 as
determined by the Board.
(b) Unless a staggered renewal system is adopted under Article
21.01-2 of this code and its subsequent amendments, a license shall
continue in force until June 1 after the second anniversary of the
date on which the license was issued unless previously cancelled.
(c) The Board shall keep a record of the names and addresses of all
licensed agents in such manner that the agents appointed by any
company authorized to transact title insurance business within the
State of Texas may be conveniently ascertained and inspected by any
person upon request.
Sec. 3. (a) A licensed title insurance agent may be appointed to
represent additional title insurance companies. Each additional
company must notify the Board of the appointment in the manner
prescribed by the Board. The agent shall pay a nonrefundable fee
for each additional appointment set by the Board in an amount not to
exceed $16. The fee must accompany the notice. A title insurance
company may not permit an agent appointed by the company to write,
sign, or deliver title insurance until the agent has complied with
this subsection. The agent shall be deemed appointed for the
additional title insurance company on the eighth day following the
date the Board receives the completed notice of appointment and the
nonrefundable fee unless the Board rejects the appointment for
reasons stated in writing not later than the seventh day after the
date on which the Board receives the notice of appointment.
(b) An appointment made under Subsection (a) of this section
continues in effect without the necessity of renewal until it is
terminated and withdrawn by the title insurance company as provided
by Subsection (c) of this section or is otherwise terminated in
accordance with this article. Each renewal license issued to the
agent authorizes the agent to represent and act for the title
insurance companies for which the agent holds an appointment until
the appointment is terminated, and that agent is considered to be
the agent of the appointing title insurance companies for the
purposes of this article.
(c) On the termination of the appointment of an agent of a title
insurance company, the company immediately shall file with the
State Board of Insurance a statement of the facts relating to the
termination of the appointment and the effective date and cause of
the termination. The Board shall terminate the appointment of the
agent to represent that insurance company in this state on receipt
of the statement.
(d) Any information, document, record, or statement required to be
made or disclosed to the Board under this article is a privileged
communication, and is not admissible in evidence in any court
action or proceeding except under a subpoena issued by a court of
record.
Sec. 4. The Board shall suspend the license of a title insurance
agent during any period in which the agent does not have an
outstanding valid appointment. The Board shall end the suspension
on receipt of acceptable notice of a valid appointment.
Secs. 5 to 7. Repealed by Acts 1993, 73rd Leg., ch. 685, Sec.
12.51(2), eff. Sept. 1, 1993.
Added by Acts 1967, 60th Leg., p. 506, ch. 219, Sec. 1, eff. Oct. 1,
1967. Amended by Acts 1979, 66th Leg., p. 1890, ch. 765, Sec. 1,
eff. Aug. 27, 1979.
Sec. A amended by Acts 1983, 68th Leg., p. 3935, ch. 622, Sec. 26,
eff. Sept. 1, 1983; Sec. B amended by Acts 1983, 68th Leg., p. 3959,
ch. 622, Sec. 51, eff. Sept. 1, 1983; Secs. E to H added by Acts
1983, 68th Leg., p. 3960, ch. 622, Sec. 52, eff. Sept. 1, 1983; Sec.
A amended by Acts 1985, 69th Leg., ch. 841, Sec. 5, eff. Sept. 1,
1985; Sec. C amended by Acts 1987, 70th Leg., ch. 1073 Sec. 9, eff.
Sept. 1, 1987. Amended by Acts 1991, 72nd Leg., ch. 242, Sec.
11.53, eff. Sept. 1, 1991. Sec. 2(b) amended by Acts 1993, 73rd
Leg., ch. 685, Sec. 12.05, eff. Sept. 1, 1993; Secs. 5 to 7 repealed
by Acts 1993, 73rd Leg., ch. 685, Sec. 12.51(2), eff. Sept. 1, 1993.
Art. 9.36A. Direct Operation License
A. A title insurance company owning or leasing and operating an
abstract plant or participating in a bona fide joint abstract plant
operation in any county in this state must be licensed by the Board
for that county.
B. Before a license for a county is issued, an application must be
filed for a direct operation license, on forms to be provided by the
Board, accompanied by a nonrefundable license fee in an amount not
to exceed $50 as determined by the Board. The license fee and
renewal fees shall be deposited in the state treasury to the credit
of the State Board of Insurance operating fund to be used by the
Board to enforce this Article and all laws of this state governing
and regulating title insurance agents and title insurance
companies.
The application shall be signed and duly sworn to by the title
insurance company. The applicant must comply with and must include
in the application the following:
(1) that the title insurance company is a Texas corporation or a
foreign corporation holding a certificate of authority to insure
titles to real estate within this state and meets the requirements
of this chapter; and
(2) that the abstract plant to be licensed complies with
requirements made by the Board pertaining to abstract plants and
has been approved by the Board.
C. Each foreign or domestic title insurance company operating under
this Article shall certify to the Board on or before the expiration
date of the company's license or licenses, on forms provided by the
Board, the counties and addresses of each location within the state
at which the title insurance company operates an abstract plant for
which a license is to be renewed and shall file a completed renewal
application and pay a nonrefundable license renewal fee in an
amount not to exceed $50, as determined by the Board, for a license
in each county. If a license has been expired for not longer than 90
days, the licensee may renew the license by paying to the Board the
required nonrefundable renewal fee and a nonrefundable fee that is
one-half of the original license fee. If a license has been expired
for more than 90 days, the license may not be renewed. If any
company ceases to operate a licensed abstract plant, it shall
immediately notify the Board in writing and request cancellation of
the license. A title insurance company may not write, sign, or
deliver title insurance in any county in which it operates an
abstract plant until the Board has issued a license. This Article
may not be construed to prohibit the issuance of title insurance by
a title insurance company by and through a duly licensed title
insurance agent.
Unless a staggered renewal system is adopted, a license continues
in force until the second June 1 after its issuance, unless
previously cancelled. If a title insurance company surrenders or
has its certificate of authority revoked by the Board, all existing
licenses of its abstract plants automatically terminate.
The Board shall keep a record of the counties and addresses of each
location in which the title insurance company operates an abstract
plant in such a manner that the plants may be conveniently
ascertained and inspected by any person on request.
Added by Acts 1987, 70th Leg., ch. 1073, Sec. 10, eff. Sept. 1,
1987. Sec. C amended by Acts 1991, 72nd Leg., ch. 242, Sec. 11.54,
eff. Sept. 1, 1991.
Art. 9.37. Agent's Licenses: Surrender, Forfeiture; Grounds for
Revocation; Notice, Hearing and Appeal
A. Any title insurance agent or direct operation may voluntarily
surrender his license at any time by giving notice to the Board and
to the title insurance company concerned. Any agent or direct
operation shall automatically forfeit the license under the title
insurance company represented if he shall terminate his agency
contract with such company.
B. The department may discipline any agent or direct operation or
deny an application under Section 5, Article 21.01-2, of this code
and its subsequent amendments if it finds that the applicant for or
holder of such license:
(1) Has wilfully violated any provision of this Act;
(2) Has intentionally made a material misstatement in the
application for such license;
(3) Has obtained, or attempted to obtain, such license by fraud or
misrepresentation;
(4) Has misappropriated or converted to his own use or illegally
withheld money belonging to a title insurance company, an insured
or any other person;
(5) Has been guilty of fraudulent or dishonest practices;
(6) Has materially misrepresented the terms and conditions of title
insurance policies or contracts; or
(7) Has failed to maintain a separate and distinct accounting of
escrow funds, and has failed to maintain an escrow bank account or
accounts separate and apart from all other accounts.
C. Repealed by Acts 1993, 73rd Leg., ch. 685, Sec. 12.51(3), eff.
Sept. 1, 1993.
D. No applicant or licensee whose license has been denied, refused
or revoked hereunder shall be entitled to file another application
for a license as an agent or direct operation within one year from
the effective date of such denial, refusal or revocation, or, if
judicial review of such denial, refusal or revocation is sought,
within one year from the date of final court order or decree
affirming such action. Such application, when filed after one
year, may be refused by the Board unless the applicant shows good
cause why the denial, refusal or revocation of his license shall not
be deemed a bar to the issuance of a new license.
E. A disciplinary action or denial of an application under this
article may be appealed under Article 1.04 of this code and its
subsequent amendments.
F. The voluntary surrender or automatic forfeiture of a title
insurance agent license or direct operation license to the
department under Section A of this article does not affect the
culpability of the license holder for conduct of the license holder
committed before the effective date of the surrender or forfeiture,
and the commissioner may institute a disciplinary proceeding
against the license holder for conduct of the license holder
committed before the effective date of the surrender or forfeiture.
Added by Acts 1967, 60th Leg., p. 507, ch. 219, Sec. 1, eff. Oct. 1,
1967. Amended by Acts 1981, 67th Leg., p. 2638, ch. 707, Sec.
4(24), eff. Aug. 31, 1981.
Secs. A to D amended by Acts 1987, 70th Leg., ch. 1073, Sec. 11, eff.
Sept. 1, 1987; Sec. B amended by Acts 1993, 73rd Leg., ch. 685, Sec.
12.06, eff. Sept. 1, 1993; Sec. C repealed by Acts 1993, 73rd Leg.,
ch. 685, Sec. 12.51(3), eff. Sept. 1, 1993; Sec. E amended by Acts
1993, 73rd Leg., ch. 685, Sec. 12.06, eff. Sept. 1, 1993; Sec. F
added by Acts 1999, 76th Leg., ch. 1168, Sec. 1, eff. Sept. 1, 1999.
Art. 9.38. Bonds for Agents and Direct Operations
(a) Every person, firm, association, or corporation which has been
licensed as a title insurance agent or direct operation shall make,
file, and pay for a surety bond with a corporate surety company
authorized to write surety bonds in this state, payable to the State
Board of Insurance in the sum of the greater of Ten Thousand Dollars
($10,000) or an amount equal to ten percent (10%) of the gross
premium written by the agent or direct operation in accordance with
the latest statistical report to the Board, but not to exceed One
Hundred Thousand Dollars ($100,000). The bond shall obligate the
principal and surety to pay such pecuniary losses as may result to
any participant in an insured real estate transaction which shall
be sustained through acts of fraud, dishonesty, theft,
embezzlement, or wilful misapplication on the part of a title
insurance agent or direct operation, or which may result to the
Board due to administrative expenses incurred in a receivership of
a title insurance agent or direct operation. In lieu of such bond
any title insurance agent or direct operation may deposit with the
Board cash or irrevocable letters of credit issued by a financial
institution in this state insured by an agency of the United States
government (or securities approved by the Board) which deposits
shall be subject to the same conditions as provided for in said
bond.
(b) If at any time it appears to the Board that a loss covered by the
bond or deposit has been suffered, the Board may require the title
insurance agent or direct operation to appear in Travis County with
such records as the Board deems proper on a named date not earlier
than ten (10) days nor later than fifteen (15) days from service of
notice, and there conduct an examination into the matter. If upon
such examination the Board is satisfied that a loss covered by the
bond or deposit has been suffered, the Board shall immediately
notify the surety and prepare a written statement covering the
facts and deliver it to the Attorney General of Texas, whose duty it
shall be to investigate the charges, and if satisfied that a loss
covered by the bond or deposit has been suffered, then to enforce
the liability against cash or securities, or by suit on said bond in
Travis County in the name of the Board for the benefit of all
parties who have suffered any loss covered by the bond or deposit.
(c) Each title insurance agent receiving a portion of a premium
shall, in a form prescribed by the Board, disclose to each purchaser
of a title insurance policy or other title insurance form the
following:
(1) each shareholder, owner, or partner having, owning, or
controlling one percent or more of the title insurance agent;
(2) each shareholder, owner, or partner having, owning, or
controlling 10 percent or more of an entity that has, owns, or
controls one percent or more of the title insurance agent;
(3) any person who is not a full-time employee of the title
insurance agent and who receives any portion of the title insurance
premium for services performed on behalf of the title insurance
agent in connection with the issuance of a title insurance form;
and
(4) the amount of premium that any person disclosed in accordance
with Subdivision (3) of this subsection shall receive.
Added by Acts 1967, 60th Leg., p. 508, ch. 219, Sec. 1, eff. Oct. 1,
1967.
Amended by Acts 1987, 70th Leg., ch. 1073, Sec. 12, eff. Sept. 1,
1987; Subsec. (c) added by Acts 1991, 72nd Leg., ch. 242, Sec.
2.51, eff. Sept. 1, 1991.
Art. 9.39. Annual Audit
(a) Every title insurance agent and direct operation shall have an
annual audit, at the agent's or direct operation's expense, made of
trust fund accounts, and before the 91st day after the date of the
termination of its fiscal year, shall send by certified mail,
postage prepaid, to the department one copy of such audit report
with a letter of transmittal, and each such agent, shall also send a
copy of such letter of transmittal and audit report to every title
insurance company which it represents.
(b) Every title insurance company shall have an annual audit, at its
expense, made of trust fund accounts for each county in which it
operates in its own name and before the 91st day after the date of
the termination of its fiscal year shall send by certified mail,
postage prepaid, to the department one copy of such audit report.
(c) The Commissioner shall promulgate regulations setting forth the
standards of audit and the form of audit report required.
(d) Said audit shall be made by an independent certified public
accountant or licensed public accountant, or a firm composed of
either.
(e) If a title insurance company fails to receive an audit report
from any of its agents or direct operations before the 91st day
after the date of the termination of the fiscal year of the agent or
direct operation, it shall report that omission to the department
not later than the 30th day after the expiration of the 90-day
period.
(f) All such reports furnished by the title insurance company to the
department shall, at the election of the Commissioner, be classed
as confidential and privileged after having been filed with the
department.
(g) If any agent, direct operation, or title insurance company
shall fail or refuse to furnish an audit report within the time
required, or shall furnish an audit report which reveals any
shortage or other irregularity, or any practice not in keeping with
sound, honest business practices, the department may, after notice
to the agent, direct operation, or each title insurance company
involved and after a hearing at which the agent, direct operation,
or title insurance company may offer evidence explaining or
excusing such omissions or irregularity, revoke the license of such
agent or direct operation or revoke the certificate of authority of
such title insurance company.
(h) Any agent, direct operation, or title insurance company feeling
aggrieved by any action of the Commissioner shall have the right to
appeal under Article 1.04 of this code.
Added by Acts 1967, 60th Leg., p. 509, ch. 219, Sec. 1, eff. Oct. 1,
1967. Amended by Acts 1979, 66th Leg., p. 1891, ch. 765, Sec. 2,
eff. Aug. 27, 1979.
Amended by Acts 1987, 70th Leg., ch. 1073, Sec. 13, eff. Sept. 1,
1987; Acts 1999, 76th Leg., ch. 1171, Sec. 1, eff. Sept. 1, 1999.
Art. 9.39A. Disbursement from Trust Fund Accounts
(a) A title insurance company, title insurance agent, direct
operation, or escrow officer shall not disburse funds from a trust
fund account until good funds related to the transaction in amounts
sufficient to fund any disbursements from the transaction have been
received and deposited to the trust fund account.
(b) The State Board of Insurance shall adopt rules and definitions
to implement this Article.
(c) A title insurance company, title insurance agent, direct
operation, or escrow officer is not liable for a violation of this
Article if the violation was not intentional and if it resulted from
a bona fide error notwithstanding the maintenance of procedure
reasonably adopted to avoid the error.
Added by Acts 1987, 70th Leg., ch. 1073, Sec. 14, eff. Sept. 1,
1987.
Art. 9.40. Right of Title Insurance Company to Examine Agent's
Trust Fund Accounts and to Require Reports
Any title insurance company may at such time or times as it sees
fit, through its examiners or auditors or through independent
certified public accountants commissioned by it, examine the trust
fund accounts and records pertaining thereto of any of its title
insurance agents, such examination to be made at the expense of the
title insurance company; or the title insurance company may
require special reports from any such agent regarding any of its
transactions. Each title insurance company shall periodically, but
at least every two years, audit the unused forms in the possession
of each of its title insurance agents so as to determine that all
used forms have been reported to the title insurance company. A
report of each such audit shall be made to the State Board of
Insurance.
Added by Acts 1967, 60th Leg., p. 509, ch. 219, Sec. 1, eff. Oct. 1,
1967. Amended by Acts 1975, 64th Leg., p. 1090, ch. 409, Sec. 22,
eff. Sept. 1, 1975.
Art. 9.41. Requirements for Escrow Officers
A. No person shall act in the capacity of escrow officer without (1)
being licensed by the Board, and (2) obtaining and maintaining a
surety bond as required by Article 9.45; and no title insurance
agent or direct operation shall employ any person as escrow officer
who is not licensed and bonded in accordance with the provisions of
this Act.
B. No attorney shall be required to be licensed as an escrow officer
in order to perform the duties of an escrow officer as defined in
Article 9.02(g) of this Chapter. However, an attorney may become
licensed as an escrow officer, and the employees of an attorney
licensed as an escrow officer may become licensed escrow officers,
in which case the attorney shall comply with all requirements of
this Code with regard to escrow officers and trust funds, as if the
attorney were a title insurance agent.
C. Notwithstanding any provision in this Chapter to the contrary,
no title insurance company or title insurance agent shall permit an
attorney to conduct the attorney's business in the name of such
title insurance company or title insurance agent unless the
attorney and the attorney's bona fide employees who close
transactions are licensed as escrow officers.
D. All escrow accounts utilized by licensed escrow officers for
closing transactions shall be subject to the audit requirements
contained in Article 9.39 of this Code.
Added by Acts 1967, 60th Leg., p. 509, ch. 219, Sec. 1, eff. Oct. 1,
1967.
Amended by Acts 1987, 70th Leg., ch. 1073, Sec. 15, eff. Sept. 1,
1987.
Art. 9.42. List of Escrow Officers Must be Filed
Sec. 1. (a) Each title insurance agent and direct operation
licensed and operating under the provisions of this Act shall
certify to the Board on or before the expiration date of its license
on forms provided by the Board the names and addresses of every
person employed by it to serve in the capacity of escrow officer
within the state, whose license is to be renewed, and shall apply
for and pay a nonrefundable license renewal fee in an amount not to
exceed Fifty Dollars ($50) as determined by the Board for each
person included in said list. If it shall terminate any licensed
escrow officer, it shall immediately notify the Board in writing of
such act and request cancellation of the license, notifying such
escrow officer of such action. No title insurance agent or direct
operation shall permit any person to act as escrow officer within
the state until the foregoing conditions have been complied with,
and the Board has granted the said license.
(b) Unless a system of staggered renewal is adopted under Article
21.01-2 of this code and its subsequent amendments, a license shall
continue in force until the second June 1 after its issuance, unless
previously cancelled. Provided, however, that if any title
insurance agent or direct operation surrenders its license or has
its license revoked by the Board, all existing licenses of its
escrow officers shall automatically terminate without notice.
(c) The Board shall keep a record of the names and addresses of all
escrow officers licensed by the Board in such manner that the escrow
officers employed by any title insurance agent or direct operation
within the state may be conveniently determined.
Secs. 2 to 4. Repealed by Acts 1993, 73rd Leg., ch. 685, Sec.
12.51(4), eff. Sept. 1, 1993.
Added by Acts 1967, 60th Leg., p. 509, ch. 219, Sec. 1, Oct. 1, 1967.
Amended by Acts 1979, 66th Leg., p. 1892, ch. 765, Sec. 3, eff. Aug.
27, 1979.
Amended by Acts 1983, 68th Leg., p. 3961, ch. 622, Sec. 53, eff.
Sept. 1, 1983; Sec. A amended by Acts 1987, 70th Leg., ch. 1073,
Sec. 16, eff. Sept. 1, 1987. Amended by Acts 1991, 72nd Leg., ch.
242, Sec. 11.55, eff. Sept. 1, 1991. Sec. 1(b) amended by Acts
1993, 73rd Leg., ch. 685, Sec. 12.07, eff. Sept. 1, 1993; Secs. 2 to
4 repealed by Acts 1993, 73rd Leg., ch. 685, Sec. 12.51(4), eff.
Sept. 1, 1993.
Art. 9.43. Application for Escrow Officer's License
A. Before an initial license is issued to any person to act as
escrow officer within the State of Texas for any title insurance
agent or direct operation, there shall be first filed by such title
insurance agent or direct operation with the Board an application
for an escrow officer's license on forms provided by the Board,
accompanied by a nonrefundable license fee in an amount not to
exceed Fifty Dollars ($50) as determined by the Board, which fees
including license renewal fees under Article 9.42 shall be
deposited in the state treasury to the credit of the State Board of
Insurance operating fund to be used by the State Board of Insurance
to enforce the provisions of this article and all laws of this state
governing and regulating escrow officers for such title insurance
agents or direct operation. The application shall be signed and
duly sworn to by such title insurance agent or direct operation and
by the proposed escrow officer.
B. Such application shall contain the following:
(1) that the proposed escrow officer is a natural person, a bona
fide resident of the State of Texas, and either an attorney or a
bona fide employee of an attorney licensed as an escrow officer, a
bona fide employee of a title insurance agent, or a bona fide
employee of a direct operation;
(2) that the proposed escrow officer has reasonable experience or
instruction in the field of title insurance; and
(3) that the direct operation or title insurance agent knows of no
fact or condition which would disqualify the proposed escrow
officer from receiving a license.
C. The Board shall grant such license, if it determines from the
application and its own investigation that the foregoing
requirements have been met.
D. The Commissioner of Insurance shall collect in advance from
agents requesting duplicate licenses a fee not to exceed $20. The
State Board of Insurance shall determine the amount of the fee.
Added by Acts 1967, 60th Leg., p. 510, ch. 219, Sec. 1, eff. Oct. 1,
1967. Amended by Acts 1979, 60th Leg., p. 1893, ch. 765, Sec. 4,
eff. Aug. 27, 1979.
Sec. A amended by Acts 1983, 68th Leg., p. 3936, ch. 622, Sec. 27,
eff. Sept. 1, 1983. Amended by Acts 1985, 69th Leg., ch. 841, Sec.
6, eff. Sept. 1, 1985; Acts 1987, 70th Leg., ch. 1073, Sec. 17, eff.
Sept. 1, 1987. Sec. B amended by Acts 1993, 73rd Leg., ch. 685, Sec.
12.08, eff. Sept. 1, 1993.
Art. 9.44. License of Escrow Officers; Surrender and Cancellation
Sec. 1. Any escrow officer may voluntarily surrender the escrow
officer's license at any time by giving notice to the Board. An
escrow officer shall likewise automatically forfeit the license if
the officer shall fail to be employed as an escrow officer.
Sec. 2. The department may discipline an escrow officer or deny an
application under Section 5, Article 21.01-2, of this code and its
subsequent amendments if it finds that the applicant for or holder
of such license:
(1) has wilfully violated any provision of this Act;
(2) has intentionally made a material misstatement in the
application for such license;
(3) has obtained, or attempted to obtain, such license by fraud or
misrepresentation;
(4) has misappropriated or converted to the escrow officer's own
use or illegally withheld money belonging to a direct operation,
title insurance agent, or any other person;
(5) has been guilty of fraudulent or dishonest practices;
(6) has materially misrepresented the terms and conditions of title
insurance policies or contracts; or
(7) has failed to complete all educational requirements.
Sec. 3. Repealed by Acts 1993, 73rd Leg., ch. 685, Sec. 12.51(5),
eff. Sept. 1, 1993.
Sec. 4. No applicant or licensee whose license has been denied,
refused or revoked hereunder shall be entitled to file another
application for a license as an escrow officer within one year from
the effective date of such denial, refusal or revocation, or, if
judicial review of such denial, refusal or revocation is sought,
within one year from the date of final court order or decree
affirming such action. Such application, when filed after one
year, may be refused by the Board unless the applicant shows good
cause why the denial, refusal or revocation of his license shall not
be deemed a bar to the issuance of a new license.
Sec. 5. A disciplinary action or denial of an application under this
article may be appealed under Article 1.04 of this code and its
subsequent amendments.
Sec. 6. The voluntary surrender or automatic forfeiture of an
escrow officer license to the department under Section 1 of this
article does not affect the culpability of the license holder for
conduct of the license holder committed before the effective date
of the surrender or forfeiture, and the commissioner may institute
a disciplinary proceeding against the license holder for conduct of
the license holder committed before the effective date of the
surrender or forfeiture.
Added by Acts 1967, 60th Leg., p. 510, ch. 219, Sec. 1, eff. Oct. 1,
1967. Amended by Acts 1981, 67th Leg., p. 2638, ch. 707, Sec.
4(25), eff. Aug. 31, 1981.
Secs. B, C amended by Acts 1987, 70th Leg., ch. 1073, Sec. 18, eff.
Sept. 1, 1987. Amended by Acts 1991, 72nd Leg., ch. 242, Sec.
11.56, eff. Sept. 1, 1991. Sec. 2 amended by Acts 1993, 73rd Leg.,
ch. 685, Sec. 12.09, eff. Sept. 1, 1993; Sec. 3 repealed by Acts
1993, 73rd Leg., ch. 685, Sec. 12.51(5), eff. Sept. 1, 1993; Sec. 5
amended by Acts 1993, 73rd Leg., ch. 685, Sec. 12.09, eff. Sept. 1,
1993; Sec. 6 added by Acts 1999, 76th Leg., ch. 1168, Sec. 2, eff.
Sept. 1, 1999.
Art. 9.45. Bonds for Escrow Officers
(a) Every title insurance agent and direct operation shall procure
at its expense for its escrow officers, a bond of such type as may be
approved by the State Board of Insurance with a surety licensed by
the Board to do business in Texas, in an amount to be determined by
multiplying the number of escrow officers by Five Thousand Dollars
($5,000) but not exceeding Fifty Thousand Dollars ($50,000) payable
to the State Board of Insurance, which bond shall obligate the
principal and surety to pay such pecuniary loss as the title
insurance agent or direct operation shall sustain through acts of
fraud, dishonesty, forgery, theft, embezzlement, or wilful
misapplication on the part of such escrow officer, either directly
and alone, or in connivance with others. In lieu of such bond, cash
or irrevocable letters of credit issued by a financial institution
insured by an agency of the United States government (or securities
approved by the Board) in multiples of Five Thousand Dollars
($5,000) per escrow officer employed but not exceeding Fifty
Thousand Dollars ($50,000) may be deposited by the title insurance
agent or direct operation with the Board, subject to the same
conditions as provided for in said bond.
(b) If at any time it appears to the Board that a loss covered by the
bond or deposit has been suffered, the Board may require the escrow
officer to appear in Travis County with such records as the Board
deems proper on a named date not earlier than ten (10) days nor
later than fifteen (15) days from service of notice, copies of which
notice shall also be sent to any title insurance agent or direct
operation concerned, and there conduct an examination into the
matter. If upon such examination the Board is satisfied that a loss
covered by the bond or deposit has been suffered, the Board shall
immediately notify the surety and title insurance agent or direct
operation concerned and prepare a written statement covering the
facts and deliver it to the Attorney General of Texas, whose duty it
shall be to investigate the charges, and if satisfied that a loss
covered by the bond or deposit has been suffered, then to enforce
the liability against cash or securities, or by suit on said bond in
Travis County in the name of the Board for the benefit of all
parties who have suffered any loss covered by the bond or deposit.
Added by Acts 1967, 60th Leg., p. 511, ch. 219, Sec. 1, eff. Oct. 1,
1967.
Amended by Acts 1987, 70th Leg., ch. 1073, Sec. 19, eff. Sept. 1,
1987.
Art. 9.46. Maintenance Fee; Disposition of Unexpended Balance
Text of article as amended by Acts 1993, 73rd Leg., ch. 486, Sec.
6.04
The State of Texas by and through the State Board of Insurance shall
charge an annual maintenance fee necessary to pay the expenses of
the regulation of title insurers and title insurance agents during
the succeeding year. The State Board of Insurance shall determine
the rate of assessment and collect a maintenance fee in an amount
not to exceed one percent of all amounts defined to be premium in
this chapter. This fee is not a tax and shall be reported and paid
separately from premium and retaliatory taxes. The State Board of
Insurance, after taking into account the unexpended funds produced
by this fee, if any, shall adjust the rate of assessment each year
to produce the amount of funds that it estimates will be necessary
to pay all the expenses of regulating title insurance during the
succeeding year. The fees collected shall be deposited in the State
Treasury to the credit of the State Board of Insurance operating
fund and shall be spent as authorized by legislative appropriation
only on warrants issued by the comptroller of public accounts
pursuant to duly certified requisitions of the State Board of
Insurance. The fee is included in the division of premiums and
shall not be separately charged to the title insurance agent. The
State Board of Insurance shall collect on a semiannual basis the fee
assessed under this article only from insurers whose liability
under this article for the previous year was $2,000 or more. The
State Board of Insurance may prescribe and adopt reasonable rules
to implement such payments as it deems advisable, not inconsistent
with this article.
Added by Acts 1967, 60th Leg., p. 512, ch. 219, Sec. 1, eff. Oct. 1,
1967.
Amended by Acts 1983, 68th Leg., p. 3911, ch. 622 Sec. 16, eff.
Sept. 1, 1983; Acts 1983, 68th Leg., p. 5013, ch. 902, Sec. 1, eff.
Sept. 1, 1983; Acts 1993, 73rd Leg., ch. 486, Sec. 6.04, eff. Sept.
1, 1993.
For text of article as amended by Acts 1993, 73rd Leg., ch. 685,
Sec. 3.18, see art. 9.46, post
Art. 9.46. Maintenance Fee
Text of article as amended by Acts 1993, 73rd Leg., ch. 685, Sec.
3.18
(a) The State of Texas by and through the commissioner shall
annually determine the rate of assessment of a maintenance fee to be
paid on an annual, semiannual, or other periodic basis, as
determined by the comptroller. The rate of assessment may not
exceed one percent of the correctly reported gross title insurance
premiums of all authorized insurers writing title insurance in this
state. This fee is not a tax and shall be reported and paid
separately from premium and retaliatory taxes. The fee is included
in the division of premium and may not be separately charged to the
title insurance agent. The comptroller shall collect the
maintenance fee.
(b) The commissioner, after taking into account the unexpended
funds produced by this fee, if any, shall adjust the rate of
assessment each year to produce the amount of funds that it
estimates will be necessary to pay all the expenses of regulating
title insurance during the succeeding year. In making an estimate
under this subsection, the commissioner shall take into account the
requirement that the general revenue fund be reimbursed under
Article 4.19 of this code.
(c) The fees collected shall be deposited in the State Treasury to
the credit of the general revenue fund to be reallocated to the
Texas Department of Insurance operating fund and shall be spent as
authorized by legislative appropriation on warrants issued by the
comptroller pursuant to duly certified requisitions of the
commissioner. Amounts reallocated to the Texas Department of
Insurance operating fund under this subsection may be transferred
to the general revenue fund in accordance with Article 4.19 of this
code.
(d) The comptroller may elect to collect on a semiannual or other
periodic basis the fee assessed under this article only from
insurers whose liability under this article for the previous year
was $2,000 or more.
(e) The commissioner shall advise the comptroller of the applicable
rate of assessment no later than the date 45 days prior to the due
date of the maintenance fee return for the period for which such
fees are due. If the commissioner has not advised the comptroller
of the applicable rate by such date, the applicable rate shall be
the rate applied in the previous period. If the commissioner
advises the comptroller of the applicable rate of assessment after
maintenance fees have been assessed pursuant to this subsection,
the comptroller shall:
(1) advise each insurer in writing of the amount of any additional
maintenance fees due; or
(2) refund any excess maintenance fees paid.
Added by Acts 1967, 60th Leg., p. 512, ch. 219, Sec. 1, eff. Oct. 1,
1967.
Amended by Acts 1983, 68th Leg., p. 3911, ch. 622, Sec. 16, eff.
Sept. 1, 1983; Acts 1983, 68th Leg., p. 5013, ch. 902, Sec. 1, eff.
Sept. 1, 1983; Acts 1993, 73rd Leg., ch. 685, Sec. 3.18, eff. Sept.
1, 1993.
For text of article as amended by Acts 1993, 73rd Leg., ch. 486,
Sec. 6.04, see art. 9.46, ante
Art. 9.47. Exceptions
Sec. 1. Unless title insurance companies or the business of title
insurance is expressly mentioned, no provision of this Code, except
as contained in this Chapter, shall be applicable to corporations
incorporated or doing business exclusively under this Chapter, or
to the title insurance business conducted by corporations created
under Subdivision 57, Article 1302 of the Revised Statutes of 1925,
or under Chapter 8 of this Code, or under any other law, and no law
hereafter enacted shall apply to such title insurance companies or
to such title insurance business unless such subsequent enactment
expressly states that it shall so apply.
Sec. 2. Regardless of Section 1 of this Article, where applicable to
title insurance companies, Article 1.01 through 1.25; Article
2.01; Article 2.02, Sections 1, 2 and 3; Article 2.03, except
Section 5; Article 2.04; Article 2.05; Article 2.06; Article
3.01, Section 10(a), (b) and (c); Article 3.12, except Section (c);
Article 3.13; Article 21.21; Article 21.21-1; Article 21.25;
Article 21.26; Article 21.31; Article 21.36; Article 21.37;
Article 21.43; Article 21.46; Article 21.47; Article 21.49-8;
and Subchapter F of Chapter 5 of this code shall apply to and govern
title insurance companies where applicable thereto. In case of
conflict between provisions of any of the foregoing articles and
the provisions of this Chapter Nine, the latter shall govern.
Sec. 3. The provisions of this Chapter shall not be interpreted as
regulating the practice of law by attorneys, and it is expressly
provided that the actions of an attorney in examining title or
closing a real estate transaction, whether or not a title insurance
policy is issued, shall not constitute the business of title
insurance, unless the attorney elects to be licensed as an escrow
officer. Nothing in this section shall be construed as prohibiting
the State Board of Insurance from promulgating a premium for title
insurance.
Added by Acts 1967, 60th Leg., p. 512, ch. 219, Sec. 1, eff. Oct. 1,
1967.
Sec. 2 amended by Acts 1985, 69th Leg., ch. 56, Sec. 2, eff. Aug. 26,
1985; Sec. 3 added by Acts 1987, 70th Leg., ch. 1073, Sec. 20, eff.
Sept. 1, 1987; Sec. 2 amended by Acts 1995, 74th Leg., ch. 614, Sec.
5, eff. Sept. 1, 1995.
Art. 9.48. Title Insurance Guaranty
Title
Sec. 1. This article shall be known and may be cited as the "Texas
Title Insurance Guaranty Act."
Purpose
Sec. 2. This article is for the purposes and findings set forth in
Section 1 of Article 21.28-A of the Insurance Code and in
supplementation thereto by providing funds in addition to assets of
impaired insurers for the protection of the holders of "covered
claims" as defined herein through payment and through contracts of
reinsurance or assumption of liabilities or of substitution or
otherwise.
Scope
Sec. 3. This article shall apply to all title insurance (direct and
reinsurance) written by title insurance companies authorized to do
business in this state and doing business under and regulated by the
provisions of this Chapter 9 and to trust funds or escrow accounts
of title insurance companies or title insurance agents authorized
to do business in this state and doing business under and regulated
under Chapter 9 of this code. This article may not be deemed or
construed to expand or diminish any right or obligation existing
between or among policyholders, title insurance companies, or title
insurance agents and may not be deemed or construed to require any
person to assign, waive, or relinquish any claim, right, or cause of
action arising under Article 21.21 of this code or under the
Deceptive Trade Practices-Consumer Protection Act (Section 17.41
et seq., Business & Commerce Code).
Construction
Sec. 4. This article shall be liberally construed to effect the
purpose under Section 2 which shall constitute an aid and guide to
interpretation.
Definitions
Sec. 5. As used in this article:
(1) A. "State Board of Insurance" is the State Board of Insurance of
this State.
B. "Commissioner" is the Commissioner of Insurance of this State.
(2) A. "Covered claim" is an unpaid claim:
(i) of an insured which arises out of and is within the coverage and
not in excess of the applicable limits of a title insurance policy
to which this article applies, issued or assumed (whereby an
assumption certificate is issued) by an insurer licensed to do
business in this state and covered by this article, if such insurer
becomes an "impaired insurer" after the effective date of this
article and the insured real property (or lien thereon) is located
within this state;
(ii) against trust funds or an escrow account of an impaired insurer
which arises due to a shortage of those funds or in that account;
(iii) for which an impaired insurer is liable in connection with the
fidelity of any agent of that insurer as authorized by Article 9.49
of this code; or
(iv) against trust funds or an escrow account of an impaired agent
which arises due to a shortage of those funds or in that account and
which shall be paid only from funds derived from guaranty fees and
not from assessments.
A "covered claim" under Subparagraphs (i) and (iii) of this
paragraph shall be limited to the lesser of $250,000 per claimant or
$250,000 per policy. The amount of a "covered claim" under
Subparagraph (ii) and (iv) of this paragraph is the amount of the
unpaid claim up to and not to exceed, the lesser of the amount of
funds actually delivered to the impaired insurer or agent as trust
funds or an escrow account for each claimant in a transaction from
which the claim arises or $250,000 per claimant, provided that the
cumulative amount of covered claims arising from one transaction
may not exceed $250,000.
B. "Covered claim" shall not include any amount due any reinsurer,
insurer, insurance pool, or underwriting association, as
subrogation recoveries or otherwise. "Covered claim" shall not
include supplementary payment obligations, including but not
limited to adjustment fees and expenses, attorneys' fees and
expenses, court costs, interest, enhanced damages, whether sought
as a recovery against the insured, the impaired insurer, the
impaired agent, or the association, that arise under Article 21.21
of this code or under the Deceptive Trade Practices-Consumer
Protection Act (Section 17.41 et seq., Business & Commerce Code),
and bond premiums, incurred prior to the determination that an
insurer or agent is "impaired" under this article. "Covered claim"
shall also not include any shortage of trust funds, shortage in an
escrow account resulting from the insolvency of a financial
institution, or punitive, exemplary, extracontractual, or bad
faith damages awarded by a court judgment against an insured or
insurer. A "covered claim" does not include a claim under
Subparagraph (ii) or (iv) of Paragraph A of Subdivision (2) of
Section 5 if the claimant has a lien against the real estate that
was the subject of the transaction from which the claim arises
unless that lien is held to be invalid as a matter of law. No
claimant who has caused or substantially contributed to his loss by
his action or failure to act shall have a covered claim under
Paragraph A of Subdivision (2) of Section 5.
C. If an impaired insurer or an impaired agent has insufficient
assets to pay the expenses of administering the receivership or
conservatorship estate, the association may advance funds
necessary to pay those expenses on the terms it may negotiate. Any
funds advanced with regard to the expenses of administering the
estate of an impaired agent may be paid only from the guaranty fee
account.
D. Reasonable and necessary administrative expenses incurred by a
conservator appointed by the commissioner or a receiver appointed
by a court of competent jurisdiction for an unauthorized insurer
operating in this state is a "covered claim" under this article if
the commissioner has notified the association or the association
has otherwise become aware that:
(i) the unauthorized insurer has insufficient liquid assets to pay
the expenses of administering the receivership or conservatorship
of the unauthorized insurer;
(ii) insufficient funds are available from abandoned funds as
provided by Section 8, Article 21.28 of this code; and
(iii) insufficient funds are available to the State Board of
Insurance from appropriations for use in meeting those
administrative expenses.
These administrative expenses shall be paid only from funds derived
from guaranty fees and not from assessments.
(3) "Insurer" is any title insurance company authorized to do
business in this state, and doing business under and regulated by
the provisions of this Chapter 9.
(4) "Impaired insurer" is (a) an insurer which, after the effective
date of this article, is placed in temporary or permanent
receivership under an order of a court of competent jurisdiction
based on a finding of insolvency, and which has been designated an
"impaired insurer" by the commissioner; or (b) after the effective
date of this article, an insurer placed in conservatorship after it
has been deemed by the commissioner to be insolvent and which has
been designated an "impaired insurer" by the commissioner.
(5) "Payment of covered claims" is actual payment of claims and also
is the utilization of funds of the impaired insurer and funds
derived from assessments or from guaranty fees as provided by
Section 6 of this article for consummation of contracts of
reinsurance or assumption of liabilities or contracts of
substitution to provide for liabilities arising from covered
claims.
(6) "Net direct written premiums" is the gross amount of premiums
paid by policyholders for issuance of policies of title insurance
insuring risks located in this state and to which this article
applies. The term does not include premiums for reinsurance
accepted from other licensed insurers, and there shall be no
deductions for premiums for reinsurance ceded to other insurers.
(7) "Agent" includes a title insurance agent as defined by Article
9.02(f) of this code, a title attorney as defined by Section 2(d),
Article 9.56 of this code, and any insurer's direct operation,
wholly owned subsidiary, or affiliate which performs the services
usually and customarily performed by a title insurance agent.
(8) "Impaired agent" is:
(A) an agent that is placed in temporary or permanent receivership
under an order of a court of competent jurisdiction based on a
finding of insolvency, and that has been designated an "impaired
agent" by the commissioner; or
(B) an agent placed in conservatorship after it has been deemed by
the commissioner to be insolvent and that has been designated an
"impaired agent" by the commissioner.
(9) "Association" means the Texas Title Insurance Guaranty
Association.
(10) "Account" means one of the three accounts created under
Section 14 of this article.
(11) "Board" means the board of directors of the association.
(12) "Unauthorized insurer" means a person, firm, association, or
corporation that has engaged in activities prohibited by Section 3,
Article 1.14-1 of this code while doing a title insurance business.
(13) "Trust funds" or "escrow account" includes those accounts
which are subject to annual audit pursuant to Article 9.39 of this
code.
(14) "Affiliate" means a person who directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under
common control with an impaired insurer on December 31 of the year
next proceeding the date the insurer becomes an impaired insurer.
(15) "Control" means the possession, direct or indirect, of the
power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting
securities, by contract other than a commercial contract for goods
or nonmanagement services, or otherwise, unless the power is the
result of an official position with or corporate office held by the
person. Control is presumed to exist if any person, directly or
indirectly, owns, controls, holds with the power to vote, or holds
proxies representing 10 percent or more of the voting securities of
any other person. This presumption may be rebutted by a showing
that control does not exist in fact.
Policy guaranty fees
Sec. 6. (a) The agent, or the insurer if there is no agent, who is
required to report an owner or mortgagee title insurance policy on
its statistical report to the State Board of Insurance, shall remit
a guaranty fee in an amount not to exceed $5 for each owner or
mortgagee policy which is required to be reported. The board of
directors shall determine at least annually the amount and may
adjust the amount more frequently. In determining the amount of the
guaranty fee, the board of directors shall take into consideration
the amount of funds to be maintained in the guaranty fee account
which is reasonably necessary for efficient future operation under
the terms of this article.
(b) Each agent shall remit to the association on a quarterly basis
the guaranty fees to be deposited in the guaranty fee account in
accordance with this section. The quarterly payment of guaranty
fees must be made for the calendar quarters ending March 31st, June
30th, September 30th, and December 31st on or before May 1st, August
1st, November 1st, and February 1st, respectively.
(c) Funds derived from guaranty fees shall be authorized only for
the payment of the following:
(1) "covered claims" as defined by Subparagraph (iv) of Paragraph A
and Paragraphs C and D of Subsection (2), Section 5 of this article;
and
(2) audit expenses as provided by Paragraph (13), Subsection (c),
Section 14 of this article.
(d) The State Board of Insurance shall promulgate rules consistent
with this section and conform the program created under this
section to applicable statutes, regulations, and rulings.
(e) The commissioner may suspend or revoke, after notice and
opportunity for hearing, the certificate of authority to transact
business in this state of any insurer or agent who fails to comply
with this section.
Deposit of assessments
Sec. 6A. All assessments and fees collected by the association may
be deposited into the Texas Treasury Safekeeping Trust Company in
accordance with procedures established by the comptroller. The
funds deposited shall be accounted for separately from all other
funds by the comptroller to the association.
Assessments
Sec. 7. (a) Whenever the commissioner determines that an insurer or
agent has become impaired, the association shall promptly estimate
the amount of additional funds needed to supplement the assets of
the impaired insurer or agent for the purpose of making payment of
all covered claims and administrative expenses.
(b) The association shall assess insurers amounts necessary to pay
the obligations of the association under this article subsequent to
an impairment, the expenses of handling covered claims subsequent
to an impairment, and other expenses authorized by this article.
The assessments of each member insurer shall be in the proportion
that the net direct written premiums of the member insurer for the
calendar year preceding the assessment bears to the net direct
written premiums of all member insurers and for the calendar year
preceding the assessment. Each member insurer shall be notified of
the assessment not later than the 30th day before the date on which
the assessment is due. A member insurer may not be assessed in any
year an amount greater than two percent of that member insurer's net
direct written premiums for the calendar year preceding the
assessment. If the maximum assessment, together with the other
assets of the association, does not provide in any one year an
amount sufficient to make all necessary payments, the funds
available shall be prorated and the unpaid portion shall be paid as
soon thereafter as funds become available.
(c) The association may defer, in whole or in part, the assessment
of any member insurer if the assessment would cause the member
insurer's financial statement to reflect amounts of capital or
surplus less than the minimum amounts required for a certificate of
authority by any jurisdiction in which the member insurer is
authorized to transact insurance. During the period of deferment,
no dividends may be paid to shareholders or policyholders.
Deferred assessments shall be paid when that payment will not
reduce capital or surplus below required minimums. These payments
shall be refunded to those companies receiving larger assessments
by virtue of the deferment, or at the election of such a company,
credited against future assessments. No assessment shall be made
to produce funds for the guaranty fee account but such funds shall
be derived solely from guaranty fees as provided by Section 6 of
this article.
(d) Each insurer shall pay the amount of its assessment to the
association not later than the 30th day after the date on which the
assessment is made. The commissioner may collect the assessments
on behalf of the association through suits brought for that
purpose.
(e) Income from the investment of any of the funds of the
association may be transferred to the administrative account
authorized in Section 14(a)(1) of this article. The funds in this
account may be used by the association for the purpose of meeting
administrative costs and other general expenses of the association.
If additional funds are needed for the administrative account, the
association shall assess insurers to attain the needed funds in the
same manner provided by this section.
(f) No insurer shall be deemed or considered to have or incur any
liability, real or contingent, under the provisions of this Article
9.48 of this Chapter 9 until any such assessment shall have been
actually made in writing by the association under the provisions of
this Article 9.48.
(g) An insurer designated as an impaired insurer by the
commissioner is exempt from assessment from and after the date of
designation and until the commissioner determines that the insurer
is no longer an impaired insurer.
Purpose of assessments
Sec. 7A. (a) The amounts provided pursuant to assessments made
under this article are considered to be supplemental to the
marshaling of assets for the purpose of making payments on behalf of
an impaired insurer.
(b) The association may assess its insurers or use funds derived
from assessments to pay covered claims before the receiver exhausts
the assets of the impaired insurer.
Penalty for failure to pay assessments
Sec. 8. (a) The commissioner may suspend or revoke, after notice and
hearing, the certificate of authority to transact business in this
state of any insurer who fails to pay an assessment when due, and
the association shall promptly report the failure to pay to the
commissioner. As an alternative, the commissioner may assess an
administrative penalty in accordance with Article 1.10E of this
code on any insurer that fails to pay an assessment when due. The
fine may not exceed the greater of five percent of the unpaid
assessment per month or $100 per month.
(b) Any insurer whose certificate or authority to do business in
this state is cancelled or surrendered shall be liable for any
unpaid assessments made prior to the date of such cancellation or
surrender.
Accounting for and repayment of assessments
Sec. 9. (a) Upon receipt from an insurer of payment of an assessment
or partial assessment, the association shall provide the insurer
with a participation receipt which shall create a liability against
the impaired insurer, and the holder of such participation receipt
shall be regarded as a general creditor of the impaired insurer;
provided, however, that with reference to the remaining balance of
any portions of assessments received by the association and not
expended in payment of "covered claims," the holders of such
participation receipts shall have preference over other general
creditors and shall share pro rata with other holders of
participation receipts. The association shall adopt accounting
procedures reflecting the expenditure and use of all funds received
from assessments or partial assessments and shall make a final
report of the expenditure and use of such funds to the commissioner,
which final report shall set forth the remaining balance, if any,
from the funds collected by assessment. The association shall also
make any interim reports concerning such accounting as may be
required by the commissioner. Upon completion of the final report,
the association shall, as soon thereafter as is practicable, refund
pro rata the remaining balance of such assessments to the holders of
the participation receipts.
(b) Should the association at any time determine that money exists
in the title account in excess of the amount reasonably necessary
for efficient future operation under the terms of this article, it
shall cause the excess money to be returned pro rata to the holders
of any participation receipts on which there is a balance
outstanding after deducting any credits taken against premium taxes
as authorized by Section 15 of this article. The amount deducted
for those credits shall be deposited with the comptroller for
credit to the general fund of this state. Any excess money
remaining in the title account after the distribution shall be
transferred by the association to the guaranty fee account to be
used as provided by this article.
(c) If the association determines at any time that money exists in
the administrative account in excess of the amount reasonably
necessary for efficient future operation under the terms of this
article, the association shall transfer the excess money to the
guaranty fee account to be used as provided by this article.
Administration and payment of covered claims
Sec. 10. (a) The association shall pay covered claims existing
before the determination of the impairment or arising on or before
the date of cancellation of the policies of the impaired insurer or
of the claim deadline for covered claims against an impaired agent.
The court in which the receivership proceedings are pending shall
set the date of cancellation of the policies and that date may not
be later than the date five years after the determination of
impairment. The court shall set the claim deadline and that
deadline may not be later than one year after the determination of
impairment.
(b) The association may not pay a claimant an amount in excess of
the amount of the covered claim.
(c) Notwithstanding any other provisions of this article, a covered
claim does not include a claim filed with the association after the
final date set by the court for the filing of claims against the
receiver of an impaired insurer or agent.
(d) The association stands in the place of the impaired insurer or
agent to the extent of its obligation on the covered claims and, to
that extent, has all rights, duties, and obligations of the
impaired insurer or agent as if the insurer or agent had not become
impaired. In performing its obligations under this article, the
association shall not be considered to be in the business of
insurance, shall not be considered to have assumed or succeeded to
any liabilities of the impaired insurer or the impaired agent, and
shall not be considered to otherwise stand in the shoes of the
impaired insurer or the impaired agent for any purpose, including,
but not limited to, the issue of whether the association is amenable
to the personal jurisdiction of the courts of any other state.
(e) The association shall investigate claims brought against the
association, the commissioner, or a special deputy receiver
appointed under Article 21.28 of this code if the claims involve or
may involve the association's rights and obligations under this
article, and shall adjust, compromise, settle, and pay covered
claims to the extent of the association's obligation, and deny all
other claims. The association may review settlements, releases,
and judgments to which the impaired insurer or agent or its insureds
were parties to determine the extent to which the settlements,
releases, and judgments are contested.
(f) The association shall pay claims in any order it considers
reasonable, including the payment of claims as those claims are
received from the claimants or in groups or categories of claims.
(g) Subject to the approval of the commissioner, the association
shall establish procedures by which claims may be filed with the
association and acceptable forms of proof of covered claims.
Notice of claims to the receiver of the impaired insurer or agent
shall constitute notice to the association or its agent and a list
of claims periodically shall be submitted to the association or
similar organization in another state by the receiver.
(h) The association may handle claims through its employees or
through one or more insurers or other persons designated as
servicing facilities. Designation of a servicing facility is
subject to the approval of the commissioner. Designation as a
servicing facility may be declined by a member insurer. The
association shall reimburse each servicing facility for
obligations of the association paid by the facility and for
expenses incurred by the facility while handling claims on behalf
of the association.
(i) In addition to authorization to make actual payment of covered
claims, the association may use funds derived from assessments for
the purpose of negotiating and consummating contracts of
reinsurance or assumption of liabilities or contracts of
substitution to provide for outstanding liabilities of covered
claims. There is no liability on the part of, and no cause of action
of any nature arises against, any insurer that reinsures or assumes
the policies of an impaired insurer for any act or failure to act by
the impaired insurer or its officers, directors, employees,
attorneys, or agents or by subrogation or under any type of
indemnity agreement.
(j) Funds advanced by the association under this article do not
become assets of the impaired insurer or the impaired agent but are
considered special fund loans to the impaired insurer or the
impaired agent for payment of covered claims. That loan is
repayable to the extent available from the funds of the impaired
insurer or the impaired agent.
Approval of covered claims
Sec. 11. (a) Funds received from assessments or from guaranty fees
shall be liable only for the difference between the amount of the
covered claims and the amount of the assets marshalled by the
receiver for payment to holders of covered claims. In ancillary
receiverships in this state, funds received from assessments shall
be liable only for the difference between the amount of the covered
claims and the amount of assets marshalled by the receivers in other
states for application to payment of covered claims within this
state.
(b) If a conservator is appointed to handle the affairs of an
impaired insurer or agent, the conservator shall determine whether
or not covered claims should or can be provided for in whole or in
part by reinsurance, assumption, or substitution. Upon
determination by the conservator that actual payment of covered
claims should be made, the conservator shall give notice of such
determination to claimants falling within the class of "covered
claims." The conservator shall mail such notice to the latest
address reflected in the records of the impaired insurer or agent.
If the records of the impaired insurer or agent do not reflect the
address of a claimant, the conservator may give notice by
publication in a newspaper of general circulation. Such notice
shall state the time within which the claimant must file his claim
with the conservator, which time shall in no event be less than 90
days from the date of the mailing or publication of such notice.
The conservator may require, in whole or in part, that sworn claim
forms be filed and may require that additional information or
evidence be filed as may be reasonably necessary for the
conservator to determine the legality or the amount due under a
covered claim. When an impaired insurer or agent has been placed in
conservatorship, the funds received from assessments or from
guaranty fees shall be liable only for the difference between the
amount of the covered claim approved by the conservator and the
amount of assets marshalled by the conservator for payment to
holders of covered claims.
(c) Upon determination by the conservator that actual payment of
covered claims should be made or upon order of the court to the
receiver to give notice for the filing of claims, any person who has
a cause of action against an insured of the impaired insurer under a
title insurance policy issued or assumed by such insurer shall, if
such cause of action meets the definition of "covered claim," have
the right to file a claim with the receiver or the conservator,
regardless of the fact that such claim may be unliquidated or
undetermined, and such claim may be approved as a "covered claim"
(1) if it may be reasonably inferred from the proof presented upon
such claim that such person would be able to obtain a judgment upon
such cause of action against such insured; and (2) if such person
shall furnish suitable proof that no further valid claims against
such insurer arising out of his cause of action other than those
already presented can be made; and (3) if the total liability of
such insurer to all claimants arising from the same title insurance
policy shall be no greater than its total liability would be were it
not in liquidation, rehabilitation, or conservation. In the
proceedings of considering "covered claims," no judgment against an
insured taken after the date of the commencement of the delinquency
proceedings or the appointment of a conservator shall be considered
as evidence of liability, or of the amount of damages, and no
judgment taken by default or consent against an insured or the
impaired insurer and any settlement, release, or judgment entered
into by the insured or the impaired insurer may not be considered to
be binding on the association and may not be considered as evidence
of the liability or of damages in connection with any claim brought
against the association or any other party under this article.
(d) The acceptance of payment from the association by the holder of
a covered claim or the acceptance of the benefits of contracts by
the association providing for reinsurance or assumption of
liabilities or for substitution shall constitute an assignment to
the association of any cause of action or right of the holder of
such covered claim arising from the occurrence upon which the
covered claim is based. Such assignment shall be to the extent of
the amount accepted or the value of the benefits provided by such
contracts of reinsurance or assumption of liabilities or
substitution. Such assignment to the association may be assigned
to the insurer executing such reinsurance, assumption or
substitution agreement.
(e) The receiver or statutory successor of an impaired insurer is
bound by settlements of covered claims by the association. The
court having jurisdiction shall grant those claims priority equal
to that to which the claimant would have been entitled in the
absence of this article against the assets of the impaired insurer.
The expenses of the association in handling claims shall be
accorded the same priority as the receiver's expenses.
(f) The association shall file periodically with the receiver of
the impaired insurer statements of the covered claims paid by the
association and estimates of anticipated claims on the association
that shall preserve the rights of the association against the
assets of the impaired insurer.
Nonduplication of recovery
Sec. 12. (a) A person having a claim against an insurer under law or
under any provision in an insurance policy other than a policy of an
impaired insurer, which claim is also a covered claim, must first
exhaust his rights under law or under the policy, and any amount
payable on a covered claim under this article shall be reduced by
the amount of any recovery under law or under the policy.
(b) Notwithstanding any provision to the contrary, the association,
for the purpose of avoiding undue hardship to a claimant, subject to
the approval of the receivership court or the commissioner, as the
case may be, may authorize payment of covered claims against an
impaired agent without regard to the liability of any insurer or to
coverage under any insurance policy. On payment, the association
is in all respects subrogated to the rights and claims of the
claimant.
Release from conservatorship or receivership
Sec. 13. An impaired insurer or agent placed in conservatorship or
receivership for which assessments have been made under the
provisions of this article, or for which guaranty fees have been
provided, shall not be authorized, upon release from
conservatorship or receivership, to issue new or renewal insurance
policies until such time as the impaired insurer has repaid pro rata
in full to each holder of a participation receipt the assessment
amount paid by the receipt holder or its assigns or the impaired
agent has repaid in full the amount of guaranty fees furnished by
the association; provided, however, the commissioner may, upon
application of the association and after hearing, permit the
issuance of new policies in accordance with a plan of operations by
the released insurer or agent for repayment. The commissioner may,
in approving such plan, place such restrictions upon the issuance
of new or renewal policies as he deems necessary to the
implementation of the plan. The commissioner shall give 10 days
notice of such hearing to the insurers to whom the participation
receipts were issued for an assessment made for the benefit of the
released insurer and the association, and the holders of the
receipts and the association shall be entitled to appear at and
participate in such hearing.
Association
Sec. 14. (a) Creation of the Association. There is created a
nonprofit legal entity to be known as the "Texas Title Insurance
Guaranty Association." All insurers must be members of the
association as a condition precedent to their authority to transact
insurance in this state. The association shall perform its
functions under the plan of operation and shall exercise its powers
through a board of directors. For the purposes of administration
and assessment, the board shall establish three accounts:
(1) the administrative account;
(2) the title account; and
(3) the guaranty fee account.
The association is under the immediate supervision of the
commissioner and is subject to the applicable insurance laws of
this state.
(b) Board of directors. (1) The association shall exercise its
powers through a board of directors consisting of nine persons,
three of whom must be employees or officers of the insurers, two of
whom must be employees or officers of the agents, and four of whom
must be public representatives as defined herein. Board members,
other than the public representatives, shall be chosen to give fair
representation to all insurers and agents giving due consideration
to the various categories of premium income, geographical location,
and segments of the industry represented in Texas. "Public
representative" is an individual who (i) has been a resident of
Texas for at least five years immediately preceding appointment,
(ii) is not licensed by the State Board of Insurance or subject to
the regulation of the State Board of Insurance, (iii) is not
financially involved in an organization subject to the regulation
of the State Board of Insurance other than ownership of a policy or
contract of insurance, (iv) is not a member of the immediate family
of an individual who is financially involved in an organization
subject to the regulation of the State Board of Insurance, (v) is
not engaged in or employed by an entity having a contract with an
organization subject to the regulation of the State Board of
Insurance, (vi) is not employed by, on the board of directors of, or
holding elective office by or under the authority of any unit of
federal, state, or local government or any organization that
receives a significant part of its funding from any such unit of
federal, state, or local government, (vii) is not employed by or
associated with an organization formed for the purpose of
representing licensees of the State Board of Insurance or
organizations or individuals subject to the regulation of the State
Board of Insurance, or (viii) is not required to register as a
lobbyist under Chapter 305, Government Code, by virtue of
activities on behalf of an association or other organization
representing the regulated industry. "Immediate family" includes
parents, spouse, children, brothers, and sisters who reside in the
same household. Members of the board shall be appointed by the
State Board of Insurance to serve staggered six-year terms, with
the terms of three members expiring each odd-numbered year. Each
director shall serve until a successor is appointed. A vacancy on
the board shall be filled for the unexpired term by the State Board
of Insurance. If any director, other than a public representative,
ceases to be an officer or employee of a member insurer or an agent
during a term of office, the office is vacant. All directors are
eligible to serve more than one term.
(2) Directors may not receive any remuneration or emolument of
office but are entitled to reimbursement for their actual expenses
incurred in performing their duties as directors.
(3) Each director of the association shall file a financial
statement with the secretary of state in accordance with Sections 3
and 4, Chapter 421, Acts of the 63rd Legislature, Regular Session,
1973 (Article 6252-9b, Vernon's Texas Civil Statutes).
(c) Powers and duties of association. In addition to the powers and
duties provided by other sections of this article, the association:
(1) may render assistance and advice to the commissioner, upon his
request, concerning rehabilitation, payment of claims,
continuations of coverage, or the performance of other contractual
obligations of any impaired insurer or agent;
(2) has standing to appear before any court in this state with
jurisdiction over an impaired insurer or agent concerning which the
association is or may become obligated under this article;
(3) Each director of the association shall file a financial
statement with the Texas Ethics Commission in accordance with
Subchapter B, Chapter 572, Government Code.
(4) may borrow funds as necessary to implement this article in
accordance with the plan of operation;
(5) may lend money to an impaired insurer;
(6) sue or be sued, including taking any legal actions necessary or
proper for recovery of any unpaid assessments;
(7) may enter into contracts as necessary or proper to implement
this article;
(8) may employ or retain such persons who are necessary to handle
the financial transactions of the association, and to perform any
other functions that become necessary or proper under this article;
(9) may ensure payment of the policy obligations of an impaired
insurer;
(10) may negotiate and contract with any liquidator, rehabilitator,
conservator, receiver, or ancillary receiver to carry out the
powers and duties of the association;
(11) may guarantee, assume, or reinsure, or cause to be guaranteed,
assumed, or reinsured, a policy or contract of an impaired insurer;
(12) may take legal action as necessary to avoid the payment of
improper claims, or to settle claims or potential claims against
the impaired insurer or association;
(13) shall, on the request of the commissioner, authorize the
expenditure of funds from the guaranty fee account to retain,
compensate, and reimburse for reasonable and necessary expenses, a
person or persons who will audit and review agent escrow and trust
accounts, financial condition, and compliance with applicable
statutes and rules and make reports relating to the accounts, agent
financial condition, and compliance to the commissioner, solely
under the direction of and as assigned by the commissioner;
(14) shall collect, receive, retain, and disburse the income
provided by Section 6 of this article solely for the purposes, to
the persons, and under the circumstances that are specifically
stated in this article; and
(15) may perform other acts as necessary or proper to implement this
article.
(d) Plan of operation. (1) The association shall submit to the
commissioner a plan of operation and any amendment to the plan of
operation necessary or suitable to assure the fair, reasonable, and
equitable administration of the association. The plan of operation
and any amendments to the plan of operation are effective on
approval in writing by the commissioner.
(2) If the association fails to submit a suitable plan of operation
within 180 days following the effective date of this article, or if
at any time after this article takes effect the association fails to
submit suitable amendments to the plan, the commissioner, after
notice and hearing, may promulgate reasonable rules as are
necessary or advisable to carry out this article. The rules shall
continue in force until modified by the commissioner or superseded
by a plan submitted by the association and approved by the
commissioner.
(3) All insurers shall comply with the plan of operation.
(4) The plan of operation shall, in addition to requirements
provided in other parts of this article:
A. establish procedures for handling the assets of the association;
B. establish the amount and method of reimbursing members of the
board;
C. establish regular places and times for meetings of the board of
directors;
D. establish procedures for records to be kept of all financial
transactions of the association, its agents, and the board of
directors;
E. establish any additional procedures for determining the amount
of guaranty fees and for collecting guaranty fees under Section 6 of
this article;
F. establish any additional procedures for assessments under
Section 7 of this article; and
G. contain additional provisions necessary or proper for the
execution of the powers and duties of the association.
(e) Prevention of impairments. (1) To aid in the detection and
prevention of insurer and agent impairments, the board shall carry
out the duties and may exercise the authority provided by this
subsection.
(2) The board of directors shall notify the commissioner of any
information indicating any insurer or agent may be unable or
potentially unable to fulfill its contractual obligations and may
request appropriate investigation and action by the commissioner
who may, in his discretion, make any investigation and take any
action as he deems appropriate.
(3) The board shall advise and counsel with the commissioner upon
matters relating to the solvency of insurers and agents. The
commissioner shall call a meeting of the board when he determines
that an insurer or agent is insolvent or impaired and may call a
meeting of the board when he determines that a danger of insolvency
or impairment of an insurer or agent exists. Such a meeting is not
open to the public and only members of the board of directors,
members of the State Board of Insurance, the commissioner, and
persons authorized by the commissioner shall attend such meetings.
The board shall notify the commissioner of any information
indicating that an insurer or agent may be unable or potentially
unable to fulfill its contractual obligations and request a meeting
with the commissioner. At such meetings the commissioner may
divulge to the board any information in his possession and any
records of the State Board of Insurance, including examination
reports or preliminary reports from examiners relating to such
insurer or agent. The commissioner may summon officers, directors,
and employees of an insolvent or impaired insurer or agent, or an
insurer or agent the commissioner considers to be in danger of
insolvency or impairment, to appear before the board for conference
or for the taking of testimony. Members of the board shall not
reveal information received in such meetings to anyone unless
authorized by the commissioner or the State Board of Insurance or
when required as witness in court. Board members and all of these
meetings shall be subject to the same standard of confidentiality
as is imposed upon examiners under Article 1.18 of the Insurance
Code, except that no bond shall be required of a board member.
The board shall, upon request by the commissioner, attend hearings
before the commissioner and meet with and advise the commissioner,
the receiver or the conservator appointed by the commissioner, on
matters relating to the affairs of an impaired insurer or agent and
relating to action that may be taken by the commissioner,
liquidator, or conservator to best protect the interests of persons
holding covered claims against an impaired insurer or agent and
relating to the marshalling of assets.
(4) The board may make reports and recommendations to the
commissioner relating to any matter germane to the solvency,
liquidation, rehabilitation, or conservation of any insurer or
agent. Those reports and recommendations shall not be considered
public documents until such time as an insurer is declared to be
impaired.
(5) The board may make recommendations to the commissioner for the
detection and prevention of insurer or agent impairments.
(6) At the conclusion of any insurer or agent impairment in which
the association carried out its duties under this article or
exercised any of its powers under this article, the board shall
prepare a report on the history and causes of the impairment, based
on the information available to the association, and submit a
report on these matters to the commissioner.
(7) Any insurer that has an officer, director, or employee serving
as a member of the board shall not lose the right to negotiate for
and enter into contracts of reinsurance or assumption of liability
or contracts of substitution to provide for liabilities for covered
claims with the receiver or conservator of an impaired insurer or
agent. The entering into any such contract shall not be deemed a
conflict of interest.
(8) The association or any insurer assessed under this article
shall be an interested party under Sections 3(h) and 12(b) of
Article 21.28 of the Insurance Code.
(f) Delegation of powers and duties. The plan of operation may
provide that any or all powers and duties of the association, except
those under Sections 7 and 14(c)(3) of this article, may be
delegated to a corporation, association, or other organization that
performs or will perform functions similar to those of the
association or its equivalent in two or more states. The
corporation, association, or organization shall be reimbursed as a
servicing facility would be reimbursed and shall be paid for its
performance of any other functions of the association. A
delegation under this subsection may take effect only with the
approval of both the board of directors and the commissioner and may
be made only to a corporation, association, or organization that
extends protection not substantially less favorable and effective
than that provided by this article.
(g) Notwithstanding Chapter 271, Acts of the 60th Legislature,
Regular Session, 1967 (Article 6252-17, Vernon's Texas Civil
Statutes), the board may hold an open meeting by telephone
conference call if immediate action is required and the convening
at one location of a quorum of the board is not reasonable or
practical. The meeting is subject to the notice requirements
applicable 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 part of the meeting
that is required to be open to the public shall be audible to the
public at the location specified in the notice of the meeting as the
location of the meeting and shall be tape recorded. The tape
recording shall be made available to the public for 30 days after
the meeting date.
Recognition of assessments in rates and premium tax offset
Sec. 15. Insurers shall be entitled to recoup assessments up to one
percent of their net direct written premiums from rates
promulgated, established, or approved by the State Board of
Insurance in the next calendar year. The State Board of Insurance
in promulgating, establishing, or approving rates shall take into
account assessments and refunds of assessments made in accordance
with this article and shall include in the formula forming the basis
for promulgating, establishing, or approving rates sums sufficient
to provide for recoupment by the insurers of said assessments of up
to one percent.
Unless the State Board of Insurance has determined that all amounts
paid by each insurer on assessments on total net direct written
premiums have been included in the rates and premiums as provided
above, any amounts not so included shall be allowed to such insurer
as a credit against its premium tax under Article 9.59 of this code.
The tax credit referred to herein shall be allowed at a rate of 20
percent per year for five successive years following the date of
assessment and at the option of the insurer may be taken over an
additional number of years, and the balance of any assessment paid
by the insurer and not claimed as a tax credit may be reflected in
the books and records of the insurer as an admitted asset of the
insurer for all purposes, including exhibition in annual statements
under Article 6.12 of this code.
Duties and powers of commissioner
Sec. 15A. (a) The commissioner shall notify the association of the
existence of an impaired insurer not later than the third day after
the date on which the commissioner gives notice of the designation
of impairment. The association is entitled to a copy of any
complaint seeking an order of receivership with a finding of
insolvency against an insurer at the same time that the complaint is
filed with a court of competent jurisdiction.
(b) The commissioner shall notify the board when the commissioner
receives a report from the commissioner of insurance or other
analogous officer of another state that indicates that an insurer
has been designated impaired in another state. The report to the
board must contain all significant details of the action taken or
the report received from the other commissioner or analogous
officer.
(c) The commissioner shall report to the board when the
commissioner has reasonable cause to believe from any examination,
whether completed or in process, of any insurer that the insurer may
be an impaired insurer. The board may use this information in
carrying out its duties and responsibilities under this article.
The board shall keep the report and the information contained in the
report confidential until it is made public by the commissioner or
other lawful authority.
(d) On the request of the board, the commissioner shall provide the
association with a statement of the net direct written premiums of
each insurer.
(e) The commissioner may require that the association notify the
insureds of the impaired insurer and any other interested parties
of the designation of impairment and of their rights under this
article. Notification by publication in a newspaper of general
circulation is sufficient notice under this section.
Advertisement
Sec. 16. It shall be unlawful for an insurer or agent to advertise
or refer to this article in any manner as an inducement to the
purchase of title insurance.
Immunity; attorney general representation
Sec. 17. (a) There shall be no liability on the part of and no cause
of action of any nature shall arise against any member insurer of
the association or its agents or employees, the association or its
agents or employees, members of the association's board of
directors, the receiver, a special deputy receiver or its agents or
employees, or the commissioner or his representatives for any good
faith action or omission in the performance of their powers and
duties under this article.
(b) The attorney general shall defend any action to which
Subsection (a) applies that is brought against a member insurer or
its agents or employees, the association or its agents or
employees, members of the association's board of directors, a
special deputy receiver or its agents or employees, or the
commissioner or the commissioner's representatives. This
subsection continues to apply to an action instituted after the
defendant's service with the guaranty association, commissioner,
or department has terminated. This subsection does not require the
attorney general to defend any person or entity with respect to an
issue other than the applicability or effect of the immunity
created by Subsection (a). The attorney general is not required to
defend any member insurer of the association or its agents or
employees, the association or its agents or employees, members of
the association's board of directors, a special deputy receiver or
its agents or employees with respect to any actions filed regarding
the disposition of a claim filed with the guaranty association
under this Act or to an issue other than the applicability or effect
of the immunity created by Subsection (a). The association may
contract with the attorney general under the Interagency
Cooperation Act (Article 4413(32), Vernon's Texas Civil Statutes)
to provide legal services not covered under this subsection.
Rules and regulations
Sec. 18. The State Board of Insurance is authorized and directed to
issue such reasonable rules and regulations as may be necessary to
carry out the various purposes and provisions of this article and in
augmentation thereof.
Certain evidence not admissible; unfair practices
Sec. 19. (a) In any lawsuit brought by a conservator or receiver of
an impaired insurer or agent for the purpose of recovering assets of
the impaired insurer or agent, the fact that claims against the
impaired insurer or agent have been or will be paid under this
article is not admissible for any purpose and may not be placed
before any jury by evidence, argument, or reference in any manner.
(b) The use in any manner of the protection afforded by this article
by any person in the sale of insurance shall constitute unfair
competition and unfair practices under Article 21.21 of this code
and that person is subject to that article.
Appeals
Sec. 20. (a) A member insurer may appeal any action or ruling of the
association relating to an assessment made under this article to
the commissioner.
(b) Any action or ruling of the commissioner under this article may
be appealed as provided in Article 1.04 of the Insurance Code, as
amended.
(c) If an insurer is appealing an assessment, the amount assessed
shall be paid to the association and shall be available to meet
association obligations during the pendency of an appeal. If the
appeal on the assessment is upheld, the amount paid in error or
excess shall be returned to the insurer.
(d) Venue in a suit relating to any action or ruling made under this
article is in Travis County. Either party to the action may appeal
to the appellate court having jurisdiction over the cause. The
appeal shall be at once returnable to the appellate court having
jurisdiction over the cause, and the action so appealed shall have
precedence in the appellate court over all cases of a different
character pending before the court. The commissioner and
association are not required to give an appeal bond in an appeal of
a cause of action arising under this article.
Tax exemption
Sec. 20A. The association is exempt from payment of all fees and all
taxes levied by this state or any of its subdivisions except taxes
levied on real or personal property.
Stay of proceedings
Sec. 20B. All proceedings in which an impaired insurer is a party or
is obligated to defend a party in any court in this state, except
proceedings directly related to the receivership or instituted by
the receiver, shall be stayed for six months and any additional time
thereafter as may be determined by the court from the date of the
designation of impairment or an ancillary proceeding is instituted
in the state, whichever is later, to permit proper defense by the
receiver or the association of all pending causes of action. As to
any covered claims arising from a judgment under any decision,
verdict, or finding based on the default of the impaired insurer or
its failure to defend an insured, the association either on its own
behalf or on behalf of the insured may apply to have the judgment,
order, decision, verdict, or finding set aside by the same court or
administrator that made the judgment, order, decision, verdict, or
finding and shall be permitted to defend the claim on the merits.
The receiver or statutory successor of an impaired insurer covered
by this article shall permit access by the board or its authorized
representative to records of the impaired insurer as are necessary
for the board in carrying out its functions under this Act with
regard to covered claims. In addition, the receiver or statutory
successor shall provide the board or its representative with copies
of the records on request of the board and at the expense of the
board.
Control over conflicts
Sec. 21. The provisions of this article and the powers and functions
authorized by this article are to be exercised to the end that its
purposes are accomplished. This article is cumulative of existing
laws, but in the event of conflict between this article and other
law relating to the subject matter of this article or its
application, the provisions of this article shall control.
However, Articles 21.28 and 21.28-A of this code always prevail
over this article.
Unconstitutional application prohibited
Sec. 22. This article and law does not apply to any insurer or other
person to whom, under the Constitution of the United States or the
Constitution of the State of Texas, it cannot validly apply.
Miscellaneous provisions
Sec. 23. (a) The association shall maintain records of all
negotiations and meetings in which the association or its
representatives discuss the activities of the association in
carrying out its powers and duties under this article. Records of
the negotiations or meetings may be made public only on the
termination of a liquidation, rehabilitation, or conservation
proceeding involving the impaired or insolvent insurer, on the
termination of the impairment or insolvency of the insurer, or on
the order of a court of competent jurisdiction. This subsection
does not limit the duty of the association to report on its
activities under Section 14 of this article.
(b) To carry out its obligations under this article, the
association is considered a creditor of the impaired or insolvent
insurer to the extent of assets attributable to covered policies,
reduced by any amounts that the association recovers as a subrogee
under this article. Assets of the impaired or insolvent insurer
attributable to covered policies shall be used to continue all
covered policies and pay all contractual obligations of the
impaired or insolvent insurer as required by this article. For
purposes of this subsection, assets attributable to covered
policies are that proportion of the assets that the reserves that
should have been established for the covered policies bear to the
reserves that should have been established for all policies of
insurance written by the impaired or insolvent insurer.
(c) A distribution to stockholders of an impaired or insolvent
insurer may not be made until the total amount of valid claims of
the association for funds expended in carrying out its powers and
duties under this article with respect to the insurer have been
recovered with interest by the association.
(d) If an order of receivership of an insurer domiciled in this
state has been entered, the receiver appointed under the order may
recover on behalf of the insurer, from any affiliate that
controlled it, the amount of distributions, other than stock
dividends paid by the insurer on its capital stock, made at any time
during the five years preceding the petition for liquidation or
rehabilitation, subject to the limitations imposed under
Subsections (e), (f), and (g) of this section.
(e) A distribution to stockholders is not recoverable under
Subsection (d) of this section if the insurer shows that the
distribution was lawful and reasonable as of the date of payment,
and that the insurer did not know and could not reasonably have
known that the distribution might adversely affect the ability of
the insurer to fulfill its contractual obligations.
(f) A person that was an affiliate that controlled the insurer at
the time distributions subject to Subsection (d) of this section
were paid is liable for the amount of distributions received. A
person that was an affiliate that controlled the insurer at the time
the distributions were declared is liable for the amount of
distributions the person would have received if they had been paid
immediately. If two or more persons are liable with respect to the
same distributions, those persons are jointly and severally liable.
(g) The maximum amount recoverable under Subsections (d) and (f) of
this section is the amount needed in excess of all other available
assets of the insolvent insurer to pay the contractual obligations
of the insolvent insurer.
(h) If a person liable under Subsection (f) of this section is
insolvent, all of its affiliates that controlled it at the time the
distribution was paid are jointly and severally liable for any
resulting deficiency in the amount recovered from the insolvent
affiliate.
(i) An impaired insurer placed in conservatorship or receivership
for which assessments have been made under this article, or for
which association funds have been provided, may not, on release
from conservatorship or receivership, issue new or renewal
insurance policies until the insurer has repaid in full the amount
of guaranty fees furnished by the association. The commissioner
may permit, on application of the association and after hearing,
the issuance of new policies in accordance with a plan of operation
by the released insurer for repayment. The commissioner, in
approving the plan, may place restrictions on the issuance of new or
renewal policies as necessary for the implementation of the plan.
The commissioner shall give notice of a hearing under this
subsection to the association not later than the 11th day before the
date on which the hearing is scheduled. The association and member
insurers that paid assessments in relation to the impaired insurer
are entitled to appear at and participate in the hearing. Money
recovered by the association under this subsection shall be repaid
to the member insurers that paid assessments in relation to the
impaired insurer on return of the appropriate certificate of
contribution.
Added by Acts 1975, 64th Leg., p. 1070, ch. 409, Sec. 13, eff. Sept.
1, 1975. Amended by Acts 1981, 67th Leg., p. 2639, ch. 707, Sec.
4(26), eff. Aug. 31, 1981.
Amended by Acts 1987, 70th Leg., ch. 1073, Sec. 1, eff. Sept. 1,
1987; Sec. 5(2)A, B amended by Acts 1989, 71st Leg., ch. 1082, Sec.
6.02, eff. Sept. 1, 1989; Sec. 7 amended by Acts 1989, 71st Leg.,
ch. 1082, Sec. 6.03, eff. Sept. 1, 1989; Sec. 7A added by Acts 1989,
71st Leg., ch. 1082, Sec. 6.22, eff. Sept. 1, 1989; Sec. 17 amended
by Acts 1989, 71st Leg., ch. 1082, Sec. 6.03, eff. Sept. 1, 1989;
Sec. 5(2)A amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec.
1.09, eff. Jan. 1, 1992; Sec. 5(2)C amended by Acts 1991, 72nd
Leg., 2nd C.S., ch. 12, Sec. 1.09, eff. Jan. 1, 1992; Sec. 6A added
by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 1.10, eff. Jan. 1,
1992; Sec. 7 amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec.
1.11, eff. Jan. 1, 1992; Sec. 9 amended by Acts 1991, 72nd Leg., 2nd
C.S., ch. 12, Sec. 1.12, eff. Jan. 1, 1992; Sec. 10 amended by Acts
1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 1.13, eff. Jan. 1, 1992;
Sec. 11 amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec.
1.19, eff. Jan. 1, 1992; Sec. 12(b) amended by Acts 1991, 72nd
Leg., 2nd C.S., ch. 12, Sec. 1.14, eff. Jan. 1, 1992; Sec. 14(b)(1)
amended by Acts 1991, 72nd Leg., ch. 242, Sec. 9.05, eff. Sept. 1,
1991; Sec. 14(b)(3) amended by Acts 1991, 72nd Leg., ch. 242, Sec.
11.27, eff. Sept. 1, 1991; Sec. 14(e)(3), (4) amended by Acts 1991,
72nd Leg., 2nd C.S., ch. 12, Sec. 1.16, eff. Jan. 1, 1992; Sec.
14(f) added by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 1.15,
eff. Jan. 1, 1992; Secs. 17, 20 amended and Secs. 20A, 20B added by
Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 1.17, eff. Jan. 1,
1992; Sec. 5(2)(B) amended and 5(2)(C) added by Acts 1993, 73rd
Leg., ch. 685, Sec. 11.01, eff. Sept. 1, 1993; Sec. 5(14), (15)
added by Acts 1993, 73rd Leg., ch. 685, Sec. 11.02, eff. Sept. 1,
1993; Sec. 7(g) added by Acts 1993, 73rd Leg., ch. 685, Sec. 11.03,
eff. Sept. 1, 1993; Secs. 7A, 8 amended by Acts 1993, 73rd Leg., ch.
685, Sec. 11.04, eff. Sept. 1, 1993; Sec. 10(d), (e) amended and
(j) added by Acts 1993, 73rd Leg., ch. 685, Sec. 11.05, eff. Sept.
1, 1993; Sec. 11 amended by Acts 1993, 73rd Leg., ch. 685, Sec.
11.06, eff. Sept. 1, 1993; Sec. 14(c) amended and (g) added by Acts
1993, 73rd Leg., ch. 685, Sec. 11.07, eff. Sept. 1, 1993; Sec. 15A
added by Acts 1993, 73rd Leg., ch. 685, Sec. 11.08, eff. Sept. 1,
1993; Sec. 17(a) amended by Acts 1993, 73rd Leg., ch. 685, Sec.
11.09, eff. Sept. 1, 1993; Sec. 20(c), (d) amended by Acts 1993,
73rd Leg., ch. 685, Sec. 11.10, eff. Sept. 1, 1993; Sec. 23 added by
Acts 1993, 73rd Leg., ch. 685, Sec. 11.11, eff. Sept. 1, 1993; Sec.
6(c) amended by Acts 1995, 74th Leg., ch. 898, Sec. 4, eff. Aug. 28,
1995; Sec. 14(c) amended by Acts 1995, 74th Leg., ch. 1055, Sec. 1,
eff. June 17, 1995; Sec. 6A amended by Acts 1997, 75th Leg., ch.
1423, Sec. 11.33, eff. Sept. 1, 1997; Sec. 9(b) amended by Acts
1997, 75th Leg., ch. 856, Sec. 1, eff. June 18, 1997; Sec. 9(b)
amended by Acts 1997, 75th Leg., ch. 1423, Sec. 11.34, eff. Sept. 1,
1997; Sec. 9(c) added by Acts 1997, 75th Leg., ch. 856, Sec. 1, eff.
June 18, 1997.
Art. 9.49. Insured Closing
(a) Title insurance companies operating under the provisions of
this chapter are hereby expressly authorized and empowered to issue
upon request on real property transactions in this state at no
charge whatever insured closing and settlement letters, in the form
prescribed by the board, in connection with the closing and
settlement of loans by a title insurance agent or direct operation
for any title insurance company operating under the provisions of
this chapter. Only the form prescribed by the board shall be used
in issuing such insured closing and settlement letters. The
liability of the title insurance company under a policy of title
insurance that is issued shall not be changed or altered by the
failure of the title insurance company to issue such insured
closing and settlement letters.
(b) When an owner policy of title insurance is to be issued in
connection with a real property transaction involving real property
located in this state, only the title insurance company issuing
that owner policy is hereby expressly authorized and empowered, at
or before closing, to issue, upon written request, to the buyer or
seller of the real property in connection with such closing and
settlement by a title insurance agent or direct operation an
insured closing and settlement letter, provided that the sale price
of the real property exceeds the guaranty amount specified in
Article 9.48 of this Insurance Code. Only the form of letter and
the manner of issuance prescribed by the board shall be used in
issuing such buyer's or seller's insured closing and settlement
letters. The liability of the title insurance company under any
issued policy of title insurance shall not be changed or altered by
the failure of the title insurance company to issue the authorized
buyer's or seller's insured closing and settlement letters. The
board may promulgate a charge, if any, to be made in the form and
manner prescribed by the board for the issuance of each insured
closing and settlement letter.
Added by Acts 1975, 64th Leg., p. 1078, ch. 409, Sec. 14, eff. Sept.
1, 1975.
Amended by Acts 1993, 73rd Leg., ch. 685, Sec. 16.08, eff. Sept. 1,
1993.
Art. 9.50. Home Solicitation Transactions Act as Consumer
Protection Law
Chapter 39, Business & Commerce Code, shall be deemed and
considered a consumer protection law when construed in connection
with any policy of title insurance issued in this state.
Added by Acts 1975, 64th Leg., p. 1079, ch. 409, Sec. 15, eff. Sept.
1, 1975.
Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.68, eff. Sept. 1,
1999.
Art. 9.53. Uniform Closing and Settlement Statements
On or prior to January 1, 1976, the board, after notice and hearing,
shall prescribe uniform settlement and closing statement forms to
be used in connection with the settlement and closing of any
conveyance or mortgaging of real estate in which transaction a
title insurance policy is issued by any title insurance company or
title insurance agent. The board is specifically authorized to
establish separate forms for transactions involving improved
residential real property and for all other real property
transactions. The forms prescribed by the board shall be designed
so that dual forms or separate forms provided for each party to the
transaction identifying only the charges made to such party may be
used at any settlement or closing.
Every such settlement and closing statement furnished to a party to
the transaction shall state thereon the name of any person, firm, or
corporation receiving any sum from such party to the settlement or
closing. The title insurance company and the title insurance
agent, however, shall be required to include within the closing and
settlement statement only those items of disbursement as are
actually disbursed by the title insurance company or the title
insurance agent. If a title is examined or any closing or
settlement services rendered by an attorney, other than a full-time
employee of either the title insurance company or the title
insurance agent, the amount of such fee (shown as included in the
premium) and the name of the attorney (which may be expressed by the
name of the firm, if applicable) to whom such fee was paid shall be
shown thereon. Such form shall also conspicuously and clearly
itemize the charges imposed upon such party in connection with the
settlement and closing. If a charge for title insurance is made to
such party, the form shall state whether the title insurance
premium included in such charges covers or insures the mortgagee's
interest in the property, the borrower's interest, or both.
Any title insurance company or any title insurance agent may at its
election use the uniform closing statement prepared under the
provisions of the Real Estate Settlement Procedures Act of 1974
(Public Law 93-533) in lieu of the uniform closing statement
prescribed by the board.
The provisions of this Article 9.53 of this Chapter 9 shall not
apply to the settlement or closing of any residential real estate
transaction regulated by the provisions of the Real Estate
Settlement Procedures Act of 1974 (Public Law 93-533).
The provisions of this Article 9.53 of this Chapter 9 shall not
apply to a settlement or closing if neither a title insurance
company, a title insurance agent, an attorney for a title insurance
company or title insurance agent, nor a representative of the title
insurance company, title insurance agent or attorney for a title
insurance company or title insurance agent has actually handled the
closing or settlement of such real estate transaction.
Added by Acts 1975, 64th Leg., p. 1079, ch. 409, Sec. 18, eff. Sept.
1, 1975.
Art. 9.54. Advance Disclosure of Settlement Costs Involving
Residential Property
Every title insurance company and every title insurance agent
licensed to do business in Texas under the provisions of this
Chapter 9 shall, in connection with the issuance of any type of
title policy guaranteeing either a lien upon or the title to
improved residential property, upon written request of the buyer,
seller, or borrower prior to settlement and closing, furnish to any
such requesting party to such transaction an itemized disclosure in
writing, to the extent that the information is available, each
charge to be made to such party, arising in connection with such
closing and settlement, upon any standard real estate settlement
and closing form developed, prescribed or authorized under Article
9.53 of this chapter. If information is not available concerning
any item or items of charges to be made to such party, proper
notation shall be made that a charge is to be made, but the
information is not available or that the amount shown is an estimate
of such charge. Such person shall be advised in writing as to the
identity of the person or organization responsible for such charges
to be made for which an estimate has been made or for which notation
has been made that the information is not available.
Provided, however, that the title insurance company or title
insurance agent providing the disclosures of items of charge shall
not be required to disclose costs or charges which the lender is
required by any law to disclose to such party. Nothing contained in
this Article 9.54 shall be deemed or construed as placing upon any
title insurance company or title insurance agent any of the
obligations imposed upon lenders by reason of the Federal Real
Estate Settlement Procedures Act of 1974 (Public Law 93-533).
The provisions of this Article 9.54 of this Chapter 9 shall not
apply to a settlement or closing if neither a title insurance
company, a title insurance agent, an attorney for a title insurance
company or title insurance agent, nor a representative of the title
insurance company, title insurance agent or attorney for a title
insurance company or title insurance agent has actually handled the
closing or settlement of such real estate transaction.
Added by Acts 1975, 64th Leg., p. 1080, ch. 409, Sec. 19, eff. Sept.
1, 1975.
Art. 9.55. Requirement for Issuance of Owners and Mortgagee Title
Policies in Connection With Residential Property
After January 1, 1976, whenever any improved residential real
property situated in the State of Texas shall be sold and a
mortgagee policy of title insurance or other form of agreement or
the equivalent thereof that constitutes the business of title
insurance is issued in connection with a lien thereon, the title
insurance company or title insurance agent so issuing such
mortgagee policy of title insurance form or agreement or the
equivalent thereof shall also issue an owner policy of title
insurance to the owner of such property and the required premium as
promulgated by the commissioner shall be charged.
The provisions of this article may, however, be rejected, provided
that the person acquiring title shall, at or prior to closing and
settlement, execute a written and acknowledged rejection wherein
the purchaser rejects issuance of such owner title policy. The form
of such rejection shall be prescribed, after notice and hearing, by
the commissioner.
Added by Acts 1975, 64th Leg., p. 1081, ch. 409, Sec. 20, eff. Sept.
1, 1975.
Amended by Acts 1995, 74th Leg., ch. 127, Sec. 12, eff. Sept. 1,
1995.
Art. 9.56. Creation and Operation of Attorney's Title Insurance
Company
Authorization; Applicability of Chapter; Legislative Intent
Sec. 1. (a) This Article 9.56 authorizes, under the limitations and
express requirements as herein contained, the incorporation and
operation of an "attorney's title insurance company."
(b) All provisions of Chapter 9 of this Insurance Code shall be
applicable to such attorney's title insurance company as may be so
incorporated, except as shall be otherwise expressly provided in
this Article 9.56. The provisions of this Chapter 9 which apply to
title insurance companies shall also apply to attorney's title
insurance companies except as otherwise expressly provided in this
Article 9.56; the provisions of this Chapter 9 which apply to title
insurance agents shall also apply to title attorneys, except as
otherwise expressly provided in this Article 9.56.
(c) Any rule, regulation, or promulgated premium rate heretofore
adopted by the State Board of Insurance or hereafter adopted by the
State Board of Insurance under the provisions of Chapter 9 of this
Insurance Code shall likewise be applicable to any such attorney's
title insurance company and to any title attorneys.
(d) It is the express intent of the Legislature of the State of
Texas that any such attorney's title insurance company as and when
created shall be expressly regulated as are other title insurance
companies conducting the business of title insurance under the
provisions of this Chapter 9 of this Insurance Code unless
expressly provided in this Article 9.56 to the contrary.
Definitions
Sec. 2. The following definitions shall be applicable to this
Article 9.56 of this Chapter 9, to wit:
(a) "Attorney's title insurance" means insuring, guaranteeing, or
indemnifying owners of real property or others interested therein
against loss or damage suffered by reason of liens, encumbrances
upon, or defects in the title to said property, and the invalidity
of liens thereon, issued only in connection with and as a part of a
real property transaction and title opinion of a title attorney as
the term "title attorney" is defined herein, or doing any business
in substance equivalent to any of the foregoing in a manner designed
to evade the provisions of this Chapter 9.
(b) The "business of attorney's title insurance" shall be conducted
by and through a title attorney, as herein defined, duly appointed
by such attorney's title insurance company and such business of
attorney's title insurance shall be deemed to be (1) the making as
insurer, guarantor, or surety, or proposing to make as insurer,
guarantor, or surety, of any contract or policy of title insurance;
(2) the transacting or proposing to transact, any phase of title
insurance, including solicitation, negotiation preliminary to
execution, execution of a contract of title insurance, insuring and
transacting matters subsequent to the execution of the contract and
arising out of it, including reinsurance; or (3) the doing, or
proposing to do, any business in substance equivalent to any of the
foregoing in a manner designed to evade the provisions of this
Chapter 9, all as a part of a real estate transaction and title
opinion of a title attorney.
(c) "Attorney's title insurance company" means any domestic company
organized under the provisions of this chapter for the business of
attorney's title insurance.
(d) "Title attorney" means any attorney who (1) is a member in good
standing of the State Bar of Texas; and (2) owns one or more shares
of stock in the attorney's title insurance company by which he is
appointed a title attorney under this section; and (3) is actively
engaged in the practice of law; and (4) owns or leases and controls
an abstract plant as defined by the board, or is a participant in a
bona fide joint plant operation as defined by the board, or has a
contract to obtain title information from an abstract plant
licensed by the board (which said contract is upon the form
promulgated by the board and the portion of the premium to be paid
to the owner or the operator of said abstract plant has been
approved by the board), or who is the appointed title attorney for
an attorney's title insurance company and bases his title opinion
upon title evidence furnished from an abstract plant approved by
the board and owned or leased and controlled by such attorney's
title insurance company, except that in the event any attorney does
not own or lease and control a licensed abstract plant nor is a
participant in a bona fide joint plant operation and is further
unable to contract to obtain title information from an abstract
plant licensed by the board and located in the county in which such
attorney is a resident, such attorney may satisfy the requirements
of this Subsection (4) by filing with the board disclosure of the
inability to obtain said contract as a part of his license
application upon a form prescribed by the board so as to make such
disclosure a part of the application; and (5) is appointed as a
title attorney by an attorney's title insurance company by contract
making such arrangements for division of premium as may be approved
by the board under this chapter and authorized by such attorney's
title insurance company to solicit insurance and collect premiums
and to issue or countersign policies in its behalf; and (6) is
certified as such to the State Board of Insurance; and (7) is
licensed by the board as a title attorney for such attorney's title
insurance company.
May Incorporate
Sec. 3. Private corporations may be created by 15 or more State of
Texas resident members of the State Bar of Texas to insure titles to
lands or interest therein in this state and indemnify the owners of
such lands, or the holders of interests in or liens on such lands,
against loss or damage on account of encumbrances upon or defects in
the title to such lands or interests therein, provided that such
title insurance shall be issued only in connection with and as a
part of a title opinion of a title attorney, without any premium or
fee therefor except the prescribed title insurance rates provided
for in Article 9.07 of this Chapter 9.
Subject to the provisions of Article 9.06 of this Chapter 9, and
Section 4 of this article, the capital shares of such corporations
may be issued for a par value of $100 or more per share, and in one
or more classes, provided, however, that (a) except as provided in
(b) hereafter, all such shares shall be subscribed and paid for, and
issued to members of the State Bar of Texas, residing in the State
of Texas, subject to the right of reacquisition of such shares by
such corporation in the event of death of such attorney shareholder
or failure of such attorney shareholder to be and remain a licensed
member of the State Bar of Texas, or failure of such attorney
shareholder to be and remain qualified to be appointed a title
attorney under the provisions of this Article 9.56; and (b) nothing
herein contained prohibits an association of the organized State
Bar of Texas, the State Bar of Texas, or any foundation created by
or through the State Bar of Texas, whose purposes include among
others the continuing legal education of the bench and bar of Texas,
from owning shares of any class thereof, providing at least 15
resident members of the State Bar of Texas at all times own shares
therein, whether of the same class or not.
Capital Stock and Surplus Required--Association of the Organized
State Bar of Texas, the State Bar of Texas, or any Foundation
Created By or Through the State Bar of Texas
Sec. 4. (a) The attorney's title insurance company created as an
affiliate or subsidiary of the organized State Bar of Texas, the
State Bar of Texas, or any foundation created by or through the
State Bar of Texas, and operating under the provisions of this
section, must have a paid-up capital of not less than $250,000 and a
surplus of not less than $150,000.
(b) Any other attorney's title insurance company shall meet the
capital and surplus requirements upon organization as required by
Article 9.06 of this Chapter 9.
Requirements for Title Attorneys
Sec. 5. No attorney shall act within this state as a title attorney
for an attorney's title insurance company without first having been
(1) licensed as a title attorney for such company by the board and
(2) filing a bond or cash deposit in lieu thereof as required in
Section 9; and no attorney's title insurance company shall allow or
permit any attorney to act as its title attorney within the state
unless said attorney shall first have obtained a license and filed a
bond as required by this chapter.
Title Attorney's Licenses
Sec. 6. (a) Before an initial license is issued to any Texas
licensed attorney to act as a title attorney within the State of
Texas for an attorney's title insurance company, there shall first
be filed by the attorney's title insurance company with the board an
application for a title attorney's license, on forms to be provided
by the board, accompanied by a nonrefundable fee in an amount not to
exceed $50 as determined by the board. The application shall be
signed and duly sworn to by the attorney's title insurance company
and the applicant title attorney. Such application shall contain
the following:
(1) that the applicant title attorney is a bona fide licensed Texas
attorney, resident of Texas; and
(2) that the applicant title attorney is actively engaged in the
practice of law; and
(3) that the applicant title attorney is known to the attorney's
title insurance company to have a good business reputation, to be a
current member of the State Bar of Texas, in good standing, and is
worthy of the public trust and said attorney's title insurance
company knows of no fact or condition which would disqualify him
from receiving a license; and
(4) that the applicant title attorney is qualified as defined in
this Article 9.56 of this Chapter 9.
The board shall grant such title attorney's license if it
determines from the application and its own investigation that the
foregoing requirements have been met.
The Commissioner of Insurance shall collect in advance from such
licensees requesting duplicate licenses a fee not to exceed $20.
The State Board of Insurance shall determine the amount of the fee.
(b) Unless a system of staggered renewal is adopted under Article
21.01-2 of this code and its subsequent amendments, on or before the
first day of June of each year, every attorney's title insurance
company operating under the provisions of this Chapter 9 shall
certify to the board, on forms provided by the board, the names and
addresses of every title attorney of said attorney's title
insurance company, and shall apply for and pay a fee in an amount
not to exceed $50 as determined by the board for an annual license
in the name of each title attorney included in said list; if any
such attorney's title insurance company shall terminate any
licensed title attorney, it shall immediately notify the board in
writing of such act and request cancellation of such license,
notifying the title attorney of such action. No such attorney's
title insurance company shall permit any title attorney appointed
by it to write, sign, or deliver title insurance policies within the
state until the foregoing conditions have been complied with, and
the board has granted said license. The board shall deliver such
license to the attorney's title insurance company for transmittal
to the title attorney.
Unless a system of staggered renewal is adopted under Article
21.01-2 of this code and its subsequent amendments, licenses shall
continue until the first day of the next June unless previously
cancelled; provided, however, that if any attorney's title
insurance company surrenders or has its certificate of authority
revoked by the board, all existing licenses of its title attorneys
shall automatically terminate without notice.
The board shall keep a record of the names and addresses of all
licensed title attorneys in such manner that the title attorneys
appointed by any attorney's title insurance company authorized to
transact the business of an attorney's title insurance company
within the State of Texas may be conveniently ascertained and
inspected by any person upon request.
(c) If an attorney's title insurance company terminates its
contract with a title attorney or gives notice of termination to the
title attorney, then any such title attorney may, within 30 days
after either occurrence apply to the board for continuation of his
license with an amendment thereto showing the name of another
attorney's title insurance company for whom he is or will be
authorized to act.
(d) to (g) Repealed by Acts 1993, 73rd Leg., ch. 685, Sec. 12.51(6),
eff. Sept. 1, 1993.
Authority of Title Attorney
Sec. 7. (a) A duly licensed title attorney may issue policies of
title insurance for an attorney's title insurance company only if:
(1) such title attorney is an appointed title attorney for an
attorney's title insurance company; and (2) such title attorney
bases each title opinion upon separate and current title evidence
furnished by a licensed abstract plant of the records of the county
in which the real property, the title to which is to be insured, is
located; and (3) if such title attorney does not own or lease and
control a licensed abstract plant and does not participate in a bona
fide joint plant operation, such title attorney pays to the
licensed abstract plant furnishing the title information the
portion of the premium which may be agreed upon between the title
attorney and the licensed abstract plant and approved by the board
under the contract to furnish title information provided for under
Paragraph (b) of this Section 7.
(b) The board shall, not later than January 1, 1976, promulgate the
form of the contract to be made and entered into between a title
attorney and a licensed abstract plant whereby title information
shall be furnished by a licensed abstract plant to a title attorney.
Such contract shall state therein the standards for the information
which is to be furnished. Contracts shall be entered into between
each title attorney and each licensed abstract plant. The board may
from time to time alter, change, or amend the form of such contract.
The parties to any such contract shall determine the portion of the
premium to be paid by the title attorney to the licensed abstract
plant, except that the board is authorized to and may disapprove any
division of the premium which the board finds to be excessive or
inadequate. Such portion of the premium to be paid to the licensed
abstract plant shall be deemed and considered as the "regular
charge" for title information as that term is used in Article 9.34
of this Chapter 9. Within 10 days following execution, the parties
to each such contract shall file a copy of the executed contract
with the board. Each such contract shall be deemed to be approved
as to the division of the premium until the parties are notified of
disapproval by the board.
(c) In the event a title attorney does not own or lease and control a
licensed abstract plant nor is a participant in a bona fide joint
plant operation and is unable to contract with a licensed abstract
plant to obtain the required title information in the county in
which the real property, the title to which is to be insured, is
located, such title attorney may deliver (but not issue) title
insurance policies in conformity with the provisions of Article
9.34 of this Chapter 9. Likewise, a title attorney may deliver (but
not issue) a title insurance policy upon real property in
conformity with the provisions of Article 9.34 of this Chapter 9
when based upon a duly certified abstract of title prepared by a
licensed abstract plant covering the particular real property from
the sovereignty of the soil to the date of the transaction.
(d) Each annual audit of each title attorney shall include therein
disclosure of the payments for title information and to whom such
payments were made.
Title Attorneys' Licenses: Surrender, Forfeiture, Grounds for
Revocation; Notice, Hearing, and Appeal
Sec. 8. (a) Any title attorney may surrender the license at any time
by giving notice to the board and to the attorney's title insurance
company concerned. Any title attorney shall automatically forfeit
the license under the attorney's title insurance company
represented if the title attorney terminates the title attorney's
relationship with the attorney's title insurance company.
(b) The department may discipline a title attorney or deny an
application under Section 5, Article 21.01-2, of this code and its
subsequent amendments if it finds that the applicant for or holder
of such license:
(1) has wilfully violated any provision of this Chapter 9;
(2) has intentionally made a material misstatement in the
application for such license;
(3) has obtained, or attempted to obtain, such license by fraud or
misrepresentation;
(4) has misappropriated or converted to his own use or illegally
withheld money belonging to an attorney's title insurance company,
an insured, or any other person;
(5) has been guilty of fraudulent or dishonest practices;
(6) has materially misrepresented the terms and conditions of title
insurance policies or contracts;
(7) has failed to maintain a separate and distinct accounting of
escrow funds, and has failed to maintain an escrow bank account or
accounts separate and apart from all other accounts;
(8) has failed to remain a member of the State Bar of Texas, or has
been disbarred; or
(9) is no longer actively engaged in the practice of law.
(c) Repealed by Acts 1993, 73rd Leg., ch. 685, Sec. 12.51(6), eff.
Sept. 1, 1993.
(d) No applicant or licensee whose license has been denied,
refused, or revoked hereunder shall be entitled to file another
application for a license as a title attorney within one year from
the effective date of such denial, refusal, or revocation, or, if
judicial review of such denial, refusal, or revocation is sought,
within one year from the date of final court order or decree
affirming such action. Such application, when filed after one
year, may be refused by the board unless the applicant shows good
cause why the denial, refusal, or revocation of his license shall
not be deemed a bar to the issuance of a new license.
(e) A disciplinary action or denial of an application under this
article may be appealed under Article 1.04 of this code and its
subsequent amendments.
(f) The voluntary surrender or automatic forfeiture of a title
attorney license to the department under Subsection (a) of this
section does not affect the culpability of the license holder for
conduct of the license holder committed before the effective date
of the surrender or forfeiture, and the commissioner may institute
a disciplinary proceeding against the license holder for conduct of
the license holder committed before the effective date of the
surrender or forfeiture.
Bonds for Title Attorneys
Sec. 9. (a) Every attorney who has been licensed as a title attorney
shall make, file, and pay for a surety bond with a corporate surety
company authorized to write surety bonds in this state, payable to
the State Board of Insurance in the sum of $7,500, which bond shall
obligate the principal and surety to (1) pay such pecuniary losses
as may result to any participant in a real estate settlement or
closing where an attorney's title insurance policy is issued by
such title attorney which shall be sustained through acts of fraud,
dishonesty, theft, embezzlement, or wilful misapplication on the
part of any title attorney, (2) to pay such pecuniary loss as any
party to an escrow agreement in which the title attorney is escrowee
shall sustain through acts of fraud, dishonesty, forgery, theft,
embezzlement, or wilful misapplication on the part of such title
attorney, either directly and alone, or in connivance with others.
In lieu of such bond any title attorney may deposit with the board
cash (or securities approved by the board) which cash and
securities shall be in the amount of $7,500 and subject to the same
conditions as provided for in said bond.
(b) If at any time it appears to the board that the terms of any
title attorney's bond may have been violated, the board may require
the title attorney to appear in Travis County with such records as
the board deems proper on a named date not earlier than 10 days nor
later than 15 days from service of notice, and there conduct an
examination into the matter. If upon such examination the board is
satisfied that the terms of said bond have been violated, the board
shall immediately notify the surety and prepare a written statement
covering the facts and deliver it to the Attorney General of Texas,
whose duty it shall be to investigate the charges, and if satisfied
that the terms of said bond have been violated, then to enforce the
liability against cash or securities, or by suit on said bond in
Travis County in the name of the board for the benefit of all
parties who have suffered any loss because of breach of the terms of
said bond.
Annual Audit and Report of Title Attorneys
Sec. 10. Every title attorney shall have an annual audit, at his
expense, made of trust fund accounts, and within 90 days after
January 1 of each calendar year shall send by certified mail,
postage prepaid, to the board one copy of such audit report with a
letter of transmittal, and each such title attorney shall also send
a copy of such letter of transmittal and audit report to the
attorney's title insurance company which he represents.
Said audit shall be made by an independent certified public
accountant or licensed public accountant, or a firm composed of
either, recommended by said title attorney and approved by the
title insurance company represented by said title attorney.
Each attorney's title insurance company shall examine and analyze
the audit report furnished by each of its title attorneys and shall
within three months of receipt of same report to the board on forms
to be promulgated by the board the findings and results of its
examination and analysis of such audit report. If an attorney's
title insurance company fails to receive an audit report from any of
its title attorneys within the time specified above, it shall
forthwith report such omission to the board.
All such reports and analyses furnished by the attorney's title
insurance company to the board shall, at the election of the
commissioner, be classed as confidential and privileged after
having been filed with the board.
If any title attorney shall fail or refuse to furnish an audit
report within the time required, or shall furnish an audit report
which reveals any shortage or other irregularity, or any practice
not in keeping with sound, honest business practices, the board
may, after notice to the title attorney and the attorney's title
insurance company involved and after a hearing at which the
attorney and attorney's title insurance company may offer evidence
explaining or excusing such omissions or irregularity, revoke the
license of such title attorney.
Any title attorney or attorney's title insurance company feeling
aggrieved by any action of the board hereunder shall have the right
to file a suit in a District Court of Travis County in the time and
manner provided in Section 8.
Right of Attorney's Title Insurance Company to Examine Title
Attorney's Fund Accounts and Require Reports
Sec. 11. Any attorney's title insurance company may at such time or
times as it sees fit, through its examiners or auditors or through
independent certified public accountants commissioned by it,
examine the trust fund accounts and records pertaining thereto of
any of its title attorneys, such examination to be made at the
expense of the attorney's title insurance company; or the
attorney's title insurance company may require special reports from
any such title attorney regarding any of its transactions.
Application to Other Title Insurance Companies
Sec. 12. The business of attorney's title insurance shall only be
conducted by attorney's title insurance companies, as defined
herein, and no title insurance company, foreign or domestic, or
title insurance agent or escrow officer of a title insurance agent
presently or hereafter licensed to transact a title insurance
business in the State of Texas, pursuant to the provisions of this
Chapter 9 of this Insurance Code, may operate as an attorney's title
insurance company or a title attorney under the provisions of this
chapter.
Exemption From Other Acts
Sec. 13. (a) The sale, issuance, or offering of any capital stock to
persons permitted by the provisions of this Article 9.56 to own such
capital stock are hereby exempted from all provisions of the laws of
this state, other than this Chapter 9, which provide for
supervision, registration, or regulation in connection with the
sale, issuance, or offering of securities; and the sale, issuance,
or offering of any such capital stock to such persons shall be legal
without any action or approval whatsoever on the part of any
official or state regulatory agency authorized to license,
regulate, or supervise the sale, issuance, or offering of
securities.
(b) The shares of stock of each attorney's title insurance company
(regardless of class) may be owned only (except as provided in
Section 3 of this Article 9.56) by attorneys duly licensed by the
State Bar of Texas, residing in the State of Texas, and qualified to
be appointed a title attorney under the provisions of this Article
9.56. Each certificate evidencing any share shall have endorsed
thereon provisions relating to limitation upon the alienation of
such shares whereby such shares may be owned only by such qualifying
attorneys or the attorney's title insurance company so issuing such
shares. The provisions of this Section 13B shall not, however, be
applicable to shares owned by the organized State Bar of Texas, the
State Bar of Texas, or any foundation created by or through the
State Bar of Texas, whose purposes include among others the
continuing legal education of the bench and bar of Texas.
(c) At time of organization of any attorney's title insurance
company, the applicants for such attorney's title insurance company
shall, as a part of the application for granting and approving the
charter of such attorney's title insurance company, file with and
obtain the approval of the State Board of Insurance an acceptable
plan providing for the reacquisition of any and all shares of stock
of such attorney's title insurance company issued to any qualified
attorney when such attorney no longer remains qualified to own the
same or upon the death of such attorney, whichever shall first
occur. Such plan shall, in addition to its other provisions,
contain an express provision that under no circumstance may such
attorney's title insurance company acquire outstanding shares of
its stock as treasury stock if such reacquisition of such shares
will result in reducing the capital and surplus of such attorney's
title insurance company below the minimum capital and surplus
required for the initial organization of such attorney's title
insurance company.
(d) In the event of the death of any title attorney, the attorney's
title insurance company shall have a period of nine months
following the death of such title attorney within which to acquire
such deceased title attorney's share or shares.
Added by Acts 1975, 64th Leg., p. 1081, ch. 409, Sec. 21, eff. Sept.
1, 1975. Amended by Acts 1981, 67th Leg., p. 2640, ch. 707, Sec.
4(27), eff. Aug. 31, 1981.
Sec. 6 amended by Acts 1983, 68th Leg., p. 3963, ch. 622, Sec. 54,
eff. Sept. 1, 1983; Sec. 6(a) amended by Acts 1985, 69th Leg., ch.
841, Sec. 7, eff. Sept. 1, 1985; Sec. 6(b) amended by Acts 1993,
73rd Leg., ch. 685, Sec. 12.10, eff. Sept. 1, 1993; Sec. 6(d) to (g)
repealed by Acts 1993, 73rd Leg., ch. 685, Sec. 12.51(6), eff. Sept.
1, 1993; Sec. 8(b) amended by Acts 1993, 73rd Leg., ch. 685, Sec.
12.11, eff. Sept. 1, 1993; Sec. 8(c) repealed by Acts 1993, 73rd
Leg., Sec. 12.51(6), eff. Sept. 1, 1993; Sec. 8(e) amended by Acts
1993, 73rd Leg., ch. 685, Sec. 12.11, eff. Sept. 1, 1993; Sec. 8(a)
amended by and Sec. 8(f) added by Acts 1999, 76th Leg., ch. 1168,
Sec. 3, eff. Sept. 1, 1999.
Art. 9.57. Title Insurance Policy Provisions
(a) Each policy of title insurance insuring an owner of real
property delivered or issued for delivery in this state shall
include certain provisions, the form, substance, and content of
which shall be promulgated by the State Board of Insurance, in
accordance with this article.
(b) If after the policy of title insurance has been issued, the
insured reports to the title insurance company that a lien or
encumbrance exists which is not excepted under the policy or
excluded from coverage or that there is a defect in the title
likewise not excepted under the policy or excluded from coverage:
(1) the title insurance company will promptly investigate to
determine if that lien or encumbrance is valid and not barred by law
or statute; and
(2) if the title insurance company concludes that a valid lien or
encumbrance, not barred by law or statute, exists or that a title
defect exists, the title insurance company will take one of the
following actions:
(A) institute all necessary legal proceedings to clear the title to
the property;
(B) indemnify the insured pursuant to the terms of the policy;
(C) reinsure at current value the title to the property without
making exception to the lien, encumbrance, or defect or indemnify
another insurer for reinsuring the title without making exception
to the lien, encumbrance, or defect;
(D) secure a release of the encumbrance, lien, or defect; or
(E) effect a combination of Subdivisions (A) through (D) of this
subsection.
(c) The State Board of Insurance may promulgate, by amendment to the
Owner Policy of Title Insurance or by separate endorsement to the
Owner Policy of Title Insurance, language to carry out this article
in a manner consistent with the terms, provisions, conditions, and
stipulations of the policy or the exceptions to coverage contained
in the schedules to the policy. Nothing in this article prohibits
the State Board of Insurance from adopting for use in this state a
policy or policies in a simplified, generally more understandable,
and usable form.
(d) The State Board of Insurance shall adopt rules and regulations
establishing standards and time schedules for implementing and
handling claims by title insurance companies as provided in this
article.
Added by Acts 1983, 68th Leg., p. 3998, ch. 622, Sec. 89, eff. Jan.
1, 1984. Subsec. (d) added by Acts 1991, 72nd Leg., ch. 242, Sec.
11.88, eff. Sept. 1, 1991.
Art. 9.58. Continuing Education
A. For protection of the public and to preserve and improve
competence of licensees, the commissioner shall require as a
condition to continuation of license as a title insurance agent or
escrow officer that during the 24 months next preceding expiration
of the current license period the licensee has enrolled in and
attended or taught 15 hours or such lesser amount established by the
commissioner in class instruction, lectures, seminars, or other
forms of education approved by the commissioner for the particular
license.
B. The instruction shall be designed to refresh the licensee's
understanding of basic principles and coverages involved, recent
and prospective changes in those principles and coverages,
applicable laws and rules and regulations of the commissioner,
proper conduct of the licensee's business, and duties and
responsibilities of the licensee.
C. The commissioner may permit licensees who because of remoteness
of residence or business cannot with reasonable convenience attend
these educational sessions to take and successfully complete an
equivalent course of study and instruction by mail.
D. The commissioner shall promulgate rules and regulations to carry
out the purposes and requirements of this article.
E. On written request of the licensee, the commissioner may extend
the time for the licensee to comply with the requirements of this
article or may exempt the licensee from some or all of the
requirements for a licensing period if the commissioner finds that
the licensee is unable to comply with the requirements because of
illness, medical disability, or another extenuating circumstance
beyond the control of the licensee. The criteria for such
exemptions and extensions shall be established by rule.
Added by Acts 1987, 70th Leg., ch. 1073, Sec. 21, eff. Sept. 1,
1987. Sec. E added by Acts 1993, 73rd Leg., ch. 961, Sec. 1, eff.
Sept. 1, 1993. Amended by Acts 1995, 74th Leg., ch. 127, Sec. 13,
eff. Sept. 1, 1995.
Art. 9.59. Title Insurance Companies; Tax on Premiums
Article repealed effective April 1, 2005.
Payment of tax
Sec. 1. Each title insurance company receiving premiums from the
business of title insurance shall pay to the comptroller a tax on
those premiums as provided in this article.
Premium defined
Sec. 2. In this article premium means the total amount of premiums
received for the taxable year on title insurance written on
property located in this state except premiums received from other
licensed title insurance companies for reinsurance, less return
premiums paid policyholders with no deduction for premiums paid for
reinsurance.
Time of filing and payment
Sec. 3. (a) A premium tax return for each taxable year ending on
December 31 of the preceding year shall be filed and the total
amount of the tax due under this article shall be paid on or before
March 1 of each year or another date prescribed by the comptroller.
(b) A semiannual prepayment of premium tax must be made on March 1
and August 1 by all insurers with net tax liability for the previous
calendar year of more than $1,000. The tax paid on each date must
equal one-half of the total premium tax paid for the previous
calendar year. If no premium tax has been paid during the previous
calendar year, the semiannual payment shall equal the tax that
would be owed on the aggregate of the gross premium receipts for the
two previous calendar quarters at the minimum tax rate specified by
law. The comptroller may refund any overpayment of premium taxes
that results from the semiannual prepayment system established by
this subsection.
(c) Without limiting the general authority of the comptroller to
adopt rules to promote the efficient administration, collection,
enforcement, and reporting of taxes under this code or another
insurance law of this state, the commissioner or comptroller, as
appropriate, may adopt rules, regulations, minimum standards, and
limitations that are fair and reasonable as may be appropriate for
the augmentation and implementation of this article.
Rate of Tax
Sec. 4. There is imposed on all premium on title insurance an annual
tax equal to 1.35 percent.
Sec. 4A. Expired.
Annual tax return
Sec. 5. Each title insurance company that is liable under this
article to remit tax on premium shall file a tax return annually on
forms prescribed by the comptroller.
Sec. 6. Repealed by Acts 1993, 73rd Leg., ch. 685, Sec. 3.29(5),
eff. Sept. 1, 1993.
Examination and Evaluation Fee Credits
Sec. 7. The amount of all examination and evaluation fees paid in
each taxable year to the State of Texas by a title insurance company
shall be allowed as a credit on the amount of premium taxes due
under this article. The limitations provided by Sections 803.007(1)
and (2)(B) of this code for domestic insurance companies apply to
foreign insurance companies. Any credit allowed by this section is
in addition to any other credits allowed by law.
No Other Taxes to be Levied or Collected; Exceptions
Sec. 8. (a) Title insurance companies and title insurance agents
subject to the tax levied by this article may not be required to pay
any additional tax in proportion to their gross premium receipts
levied by this state or any county or municipality except as
otherwise provided by this code and the Labor Code. This exemption
may not be construed to limit the applicability of other taxes,
fees, and assessments that are imposed by other chapters of this
code. This exemption may not be construed to prohibit the levy and
collection of state, county, and municipal taxes on the real and
personal property of title insurance companies and title insurance
agents, or the levy and collection of state, county, and municipal
taxes that are imposed by other laws of this state, unless a
specific exemption for title insurance companies and title
insurance agents is provided in those laws.
(b) The premium tax is levied on all amounts defined to be premium
in this Chapter, whether paid to the title insurance company or
retained by the title insurance agent, such tax being in lieu of the
tax on the premium retained by the agent. The State of Texas
facilitates the collection of the premium tax on the premium
retained by the agent by setting the division of the premium between
insurer and agent so that the insurer receives the premium tax due
on the agent's portion of the premium and remits it to the State.
Failure to pay taxes
Sec. 9. A title insurance company failing to pay all taxes imposed
by this article is also subject to Article 4.05 of this code.
Sec. 10. Repealed by Acts 1993, 73rd Leg., ch. 685, Sec. 3.29(5),
eff. Sept. 1, 1993.
Secs. 11, 12. Repealed by Acts 1989, 71st Leg., ch. 232, Sec.
25(b)(5) and (b)(6), eff. Sept. 1, 1989.
Secs. 13, 14. Repealed by Acts 1999, 76th Leg., ch. 852, Sec. 5(2),
eff. June 18, 1999.
Other laws to govern
Sec. 15. Article 4.12 applies to title insurance companies which
are subject to this article.
Sec. 16. Repealed by Acts 2003, 78th Leg., ch. 209, Sec. 59(3).
Added by Acts 1987, 70th Leg., ch. 1073, Sec. 22, eff. Jan. 1, 1988.
Sec. 4A added by Acts 1987, 70th Leg., 2nd C.S., ch. 5, art. 7, Sec.
6, eff. Dec. 31, 1987; Sec. 11 amended by Acts 1989, 71st Leg., ch.
232, Sec. 25(b)(5), eff. Sept. 1, 1989; Sec. 12 amended by Acts
1989, 71st Leg., ch. 232, Sec. 25(b)(6), eff. Sept. 1, 1989; Sec.
16 added by Acts 1989, 71st Leg., ch. 1198, Sec. 7, eff. Jan. 1,
1990; Secs. 1, 3 amended by Acts 1993, 73rd Leg., ch. 685, Sec.
3.19, eff. Sept. 1, 1993; Sec. 3(b) amended by Acts 1993, 73rd
Leg., ch. 486, Sec. 6.03, eff. Sept. 1, 1993; Sec. 5 amended by Acts
1993, 73rd Leg., ch. 685, Sec. 3.19, eff. Sept. 1, 1993; Secs. 6, 10
repealed by Acts 1993, 73rd Leg., ch. 685, Sec. 3.29(5), eff. Sept.
1, 1993; Sec. 15 amended by Acts 1995, 74th Leg., ch. 127, Sec. 14,
eff. Sept. 1, 1995; Sec. 1 amended by Acts 1997, 75th Leg., ch.
1423, Sec. 11.35, eff. Sept. 1, 1997; Sec. 3(b) amended by Acts
1997, 75th Leg., ch. 1423, Sec. 11.36, eff. Sept. 1, 1997; Sec. 4
amended by Acts 1999, 76th Leg., ch. 852, Sec. 3, eff. June 18,
1999; Secs. 13, 14 amended by Acts 1999, 76th Leg., ch. 852, Sec.
5(2), eff. June 18, 1999; Sec. 8 amended by Acts 2001, 77th Leg.,
ch. 763, Sec. 4, eff. Sept. 1, 2001; Sec. 7 amended by Acts 2003,
78th Leg., ch. 209, Sec. 7, eff. Jan. 1, 2004; Sec. 16 amended by
Acts 2003, 78th Leg., ch. 209, Sec. 59(3), eff. Oct. 1, 2003.
