81R7476 PMO-F
By: Smithee H.B. No. 4338
A BILL TO BE ENTITLED
AN ACT
relating to insolvency requirements regarding title insurance
agents.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 441.051, Insurance Code, is amended to
read as follows:
Sec. 441.051. CIRCUMSTANCES CONSTITUTING INSOLVENCY OR
DELINQUENCY. (a) For the purposes of this chapter, the
circumstances in which an insurer is considered insolvent,
delinquent, or threatened with delinquency include circumstances
in which the insurer:
(1) has required surplus, capital, or capital stock
that is impaired to an extent prohibited by law;
(2) continues to write new business when the insurer
does not have the surplus, capital, or capital stock that is
required by law to write new business;
(3) conducts the insurer's business fraudulently; or
(4) attempts to dissolve or liquidate without first
having made provisions satisfactory to the commissioner for
liabilities arising from insurance policies issued by the insurer.
(b) The commissioner may base a determination of the
insolvency of a title insurance agent, as defined by Section
2501.003, on:
(1) generally accepted accounting principles;
(2) statutory accounting principles; or
(3) other factors that the commissioner adopts by
rule.
SECTION 2. Section 443.057, Insurance Code, is amended to
read as follows:
Sec. 443.057. GROUNDS FOR CONSERVATION, REHABILITATION, OR
LIQUIDATION. The commissioner may file with a court in this state a
petition with respect to an insurer domiciled in this state or an
unauthorized insurer for an order of rehabilitation or liquidation
on any one or more of the following grounds:
(1) the insurer is impaired;
(2) the insurer is insolvent;
(3) the insurer is about to become insolvent, with
"about to become insolvent" being defined as reasonably anticipated
that the insurer will not have liquid assets to meet its next 90
days' current obligations;
(4) the insurer has neglected or refused to comply
with an order of the commissioner to make good within the time
prescribed by law any deficiency, whenever its capital and minimum
required surplus, if a stock company, or its surplus, if a company
other than stock, has become impaired;
(5) the insurer, its parent company, its subsidiaries,
or its affiliates have converted, wasted, or concealed property of
the insurer or have otherwise improperly disposed of, dissipated,
used, released, transferred, sold, assigned, hypothecated, or
removed the property of the insurer;
(6) the insurer is in a condition such that it could
not meet the requirements for organization and authorization as
required by law, except as to the amount of the original surplus
required of a stock company under Title 6, and except as to the
amount of the surplus required of a company other than a stock
company in excess of the minimum surplus required to be maintained;
(7) the insurer, its parent company, its subsidiaries,
or its affiliates have concealed, removed, altered, destroyed, or
failed to establish and maintain books, records, documents,
accounts, vouchers, and other pertinent material adequate for the
determination of the financial condition of the insurer by
examination under Chapter 401 or has failed to properly administer
claims or maintain claims records that are adequate for the
determination of its outstanding claims liability;
(8) at any time after the issuance of an order under
Section 404.003 or Chapter 441, or at the time of instituting any
proceeding under this chapter, it appears to the commissioner that,
upon good cause shown, it would not be in the best interest of the
policyholders, creditors, or the public to proceed with the conduct
of the business of the insurer;
(9) the insurer is in a condition such that the further
transaction of business would be hazardous financially, according
to Subchapter A, Chapter 404, or otherwise, to its policyholders,
creditors, or the public;
(10) there is reasonable cause to believe that there
has been embezzlement from the insurer, wrongful sequestration or
diversion of the insurer's property, forgery or fraud affecting the
insurer, or other illegal conduct in, by, or with respect to the
insurer that, if established, would endanger assets in an amount
threatening the solvency of the insurer;
(11) control of the insurer is in a person who is:
(A) dishonest or untrustworthy; or
(B) so lacking in insurance company managerial
experience or capability as to be hazardous to policyholders,
creditors, or the public;
(12) any person who in fact has executive authority in
the insurer, whether an officer, manager, general agent, director,
trustee, employee, shareholder, or other person, has refused to be
examined under oath by the commissioner concerning the insurer's
affairs, whether in this state or elsewhere or if examined under
oath, refuses to divulge pertinent information reasonably known to
the person; and after reasonable notice of the fact, the insurer has
failed promptly and effectively to terminate the employment and
status of the person and all the person's influence on management;
(13) after demand by the commissioner under Chapter
401 or under this chapter, the insurer has failed promptly to make
available for examination any of its own property, books, accounts,
documents, or other records, or those of any subsidiary or related
company within the control of the insurer or of any person having
executive authority in the insurer, so far as they pertain to the
insurer;
(14) without first obtaining the written consent of
the commissioner, the insurer has transferred, or attempted to
transfer, in a manner contrary to Chapter 823 or any law relating to
bulk reinsurance, substantially its entire property or business, or
has entered into any transaction the effect of which is to merge,
consolidate, or reinsure substantially its entire property or
business in or with the property or business of any other person;
(15) the insurer or its property has been or is the
subject of an application for the appointment of a receiver,
trustee, custodian, conservator, sequestrator, or similar
fiduciary of the insurer or its property otherwise than as
authorized under the insurance laws of this state;
(16) within the previous five years, the insurer has
wilfully and continuously violated its charter, articles of
incorporation or bylaws, any insurance law of this state, or any
valid order of the commissioner;
(17) the insurer has failed to pay within 60 days after
the due date any obligation to any state or political subdivision of
a state or any judgment entered in any state, if the court in which
the judgment was entered had jurisdiction over the subject matter,
except that nonpayment is not a ground until 60 days after any good
faith effort by the insurer to contest the obligation has been
terminated, whether it is before the commissioner or in the courts;
(18) the insurer has systematically engaged in the
practice of reaching settlements with and obtaining releases from
claimants, and then unreasonably delayed payment, failed to pay the
agreed-upon settlements, or systematically attempted to compromise
with claimants or other creditors on the ground that it is
financially unable to pay its claims or obligations in full;
(19) the insurer has failed to file its annual report
or other financial report required by statute within the time
allowed by law;
(20) the board of directors or the holders of a
majority of the shares entitled to vote, or a majority of those
individuals entitled to the control of those entities specified by
Section 443.003, request or consent to rehabilitation or
liquidation under this chapter;
(21) the insurer does not comply with its domiciliary
state's requirements for issuance to it of a certificate of
authority, or its certificate of authority has been revoked by its
state of domicile;
(22) the commissioner determines that a title
insurance agent, as defined by Section 2501.003, is insolvent based
on:
(A) generally accepted accounting principles;
(B) statutory accounting principles; or
(C) other factors that the commissioner adopts by
rule; or
(23) [(22)] when authorized by department rules.
SECTION 3. Section 2602.003(5), Insurance Code, is amended
to read as follows:
(5) "Impaired agent" means an agent that is:
(A) placed in:
(i) temporary or permanent receivership
under a court order based on a finding of insolvency under Chapter
443; or
(ii) conservatorship after the
commissioner determines that the agent is insolvent under Chapter
441; and
(B) designated by the commissioner as an impaired
agent based on:
(i) generally accepted accounting
principles;
(ii) statutory accounting principles; or
(iii) other factors that the commissioner
adopts by rule.
SECTION 4. Section 2651.001, Insurance Code, is amended by
adding Subsections (c) and (d) to read as follows:
(c) A title insurance agent may not give possession of the
agent's file to a third party, including a landlord or storage
facility, unless the third party:
(1) takes the file subject to the right of access of
the title insurance company involved in the transaction that the
file documents; and
(2) agrees to maintain the confidentiality of
nonpublic information in the agent's file according to state and
federal laws that govern the title insurance agent.
(d) A title insurance company may not appoint or continue
the appointment of a title insurance agent unless the agent agrees
in writing that:
(1) the company has a right of access to the agent's
office, files, and storage facility;
(2) the agent may not give possession of a file to a
third party, including a landlord or storage facility, without
providing notice to and obtaining consent from the title insurance
company involved in the transaction that the file documents; and
(3) the agent may not enter into an agreement with a
landlord or storage facility unless the agreement provides that:
(A) the title insurance company that appointed
the agent has the right of access to the agent's file documenting a
transaction in which the title insurance company was involved; and
(B) the landlord or storage facility shall
maintain the confidentiality of nonpublic information in an agent's
file according to the state and federal laws that govern the agent.
SECTION 5. Section 2651.011, Insurance Code, is amended to
read as follows:
Sec. 2651.011. PRIVILEGED COMMUNICATIONS. (a) Any
information, including a document, record, or statement, required
to be made or disclosed to the department under this subchapter,
other than Section 2651.001, or Chapter 36 is:
(1) a privileged communication; and
(2) not admissible in evidence in a court action or
proceeding except under a subpoena issued by a court of record.
(b) A title insurance company may provide information to or
receive information from the commissioner about a financial matter
or an audit, including certification of solvency, of a title
insurance agent that the company appointed.
(c) The information described by Subsection (b) is not
admissible in evidence in a court action or proceeding except under
a subpoena issued by a court of record.
SECTION 6. Section 2651.153, Insurance Code, is amended to
read as follows:
Sec. 2651.153. RULES. (a) The commissioner by rule shall
adopt:
(1) the standards for an audit; and
(2) the form of the required audit report.
(b) The commissioner by rule may prescribe the types of
information under Section 2651.011(b) that are privileged under
Section 2651.011(c).
(c) The commissioner by rule shall require a title insurance
agent to hold in trust funds owed to a title insurance company, a
direct operation, or another title agent from the division of
premium.
SECTION 7. Section 2651.001, Insurance Code, as amended by
this Act, applies only to an agreement executed or renewed on or
after September 1, 2009. An agreement executed or renewed before
September 1, 2009, is governed by the law as it existed immediately
before the effective date of this Act, and that law is continued in
effect for that purpose.
SECTION 8. This Act takes effect September 1, 2009.