Texas 2009 - 81st Regular

Texas House Bill HB4338 Compare Versions

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1	1	H.B. No. 4338
2	2
3	3
4	4	AN ACT
5	5	relating to title insurance agents and title insurance companies.
6	6	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
7	7	SECTION 1. Section 2501.004(b), Insurance Code, is amended
8	8	to read as follows:
9	9	(b) To provide for the safety and protection of
10	10	policyholders, the department shall require that an abstract plant
11	11	[be]:
12	12	(1) be geographically arranged;
13	13	(2) cover a period beginning not later than January 1,
14	14	1979, and be kept current; and
15	15	(3) be adequate for use in insuring titles, as
16	16	determined by the department.
17	17	SECTION 2. Section 2602.002(a), Insurance Code, is amended
18	18	to read as follows:
19	19	(a) This chapter is for:
20	20	(1) the purposes and findings stated in Sections
21	21	441.001, 441.003, 441.005, and 441.006; [and]
22	22	(2) the protection of holders of covered claims; and
23	23	(3) the protection of consumers served by impaired
24	24	agents.
25	25	SECTION 3. Sections 2602.003(5) and (6), Insurance Code,
26	26	are amended to read as follows:
27	27	(5) "Impaired agent" means a title [an] agent or
28	28	direct operation that is[:
29	29	[(A) placed in:
30	30	[(i) temporary or permanent receivership
31	31	under a court order based on a finding of insolvency; or
32	32	[(ii) conservatorship after the
33	33	commissioner determines that the agent is insolvent; and
34	34	[(B)] designated by the commissioner as an
35	35	impaired agent and is:
36	36	(A) placed by a court in this state or another
37	37	state under an order of supervision, conservatorship,
38	38	rehabilitation, or liquidation;
39	39	(B) placed under an order of supervision or
40	40	conservatorship under Chapter 441;
41	41	(C) placed under an order of rehabilitation or
42	42	liquidation under Chapter 443; or
43	43	(D) otherwise found by a court of competent
44	44	jurisdiction to be insolvent or otherwise unable to pay obligations
45	45	as they come due.
46	46	(6) "Impaired title insurance company" means a title
47	47	insurance company that is[:
48	48	[(A) placed in:
49	49	[(i) temporary or permanent receivership
50	50	under a court order based on a finding of insolvency; or
51	51	[(ii) conservatorship after the
52	52	commissioner determines that the company is insolvent; and
53	53	[(B)] designated by the commissioner as an
54	54	impaired title insurance company and is:
55	55	(A) placed by a court in this state or another
56	56	state under an order of supervision, conservatorship,
57	57	rehabilitation, or liquidation;
58	58	(B) placed under an order of supervision or
59	59	conservatorship under Chapter 441;
60	60	(C) placed under an order of rehabilitation or
61	61	liquidation under Chapter 443; or
62	62	(D) otherwise found by a court of competent
63	63	jurisdiction to be insolvent or otherwise unable to pay obligations
64	64	as they come due.
65	65	SECTION 4. Section 2602.011(a), Insurance Code, is amended
66	66	to read as follows:
67	67	(a) The commissioner shall notify the association of the
68	68	existence of an impaired title insurance company or impaired agent
69	69	not later than the third day after the date on which the
70	70	commissioner gives notice of the designation of impairment to the
71	71	impaired agent or impaired title insurance company. The
72	72	association is entitled to a copy of any complaint seeking an order
73	73	of receivership with a finding of insolvency against a title
74	74	insurance company at the time the complaint is filed with a court.
75	75	SECTION 5. Section 2602.107, Insurance Code, is amended by
76	76	adding Subsection (d) to read as follows:
77	77	(d) The association shall pay from the guaranty fee account
78	78	fees and reasonable and necessary expenses that the department
79	79	incurs in an examination or audit of a title agent or direct
80	80	operation under this chapter and Chapter 2651.
81	81	SECTION 6. Section 2602.110, Insurance Code, is amended to
82	82	read as follows:
83	83	Sec. 2602.110. EXPENSES OF ADMINISTERING IMPAIRED INSURER
84	84	OR IMPAIRED AGENT [RECEIVERSHIP OR CONSERVATORSHIP]. The
85	85	association may advance money necessary to pay the expenses of
86	86	administering the supervision, rehabilitation, receivership, [or]
87	87	conservatorship, or, as determined by a court of competent
88	88	jurisdiction, other insolvency [estate] of an impaired title
89	89	insurance company or impaired agent, on terms the association
90	90	negotiates, if the company's or agent's assets are insufficient to
91	91	pay those expenses.
92	92	SECTION 7. Section 2602.152, Insurance Code, is amended to
93	93	read as follows:
94	94	Sec. 2602.152. AMOUNT OF FEE. Annually or more frequently,
95	95	the board shall determine the amount of the guaranty fee[, not to
96	96	exceed $5], considering the amount of money to be maintained in the
97	97	guaranty fee account that is reasonably necessary for efficient
98	98	future operation under this chapter.
99	99	SECTION 8. Sections 2602.153(b) and (d), Insurance Code,
100	100	are amended to read as follows:
101	101	(b) The following [covered] claims shall be paid from
102	102	guaranty fees only and may not be paid from assessments:
103	103	(1) covered claims against trust funds or an escrow
104	104	account of an impaired agent under Section 2602.252; [and]
105	105	(2) expenses incurred in complying with Subchapter J;
106	106	(3) conservator and receiver expenses under Section
107	107	2602.254; and
108	108	(4) administrative expenses with respect to the estate
109	109	of an impaired agent under Section 2602.110.
110	110	(d) Guaranty fees may be used only for payment of:
111	111	(1) [covered] claims described by Subsection (b) [or
112	112	(c)]; and
113	113	(2) expenses related to:
114	114	(A) an audit or an examination conducted by the
115	115	department or the association under this chapter;
116	116	(B) the supervision and coordination of such an
117	117	audit or examination; and
118	118	(C) an action under Section 2602.452 [and review
119	119	expenses under Section 2602.103(b)].
120	120	SECTION 9. Sections 2602.401(a) and (b), Insurance Code,
121	121	are amended to read as follows:
122	122	(a) If an assessment has been made under this chapter for an
123	123	impaired title insurance company or association funds have been
124	124	provided for the company, the company, on release from the
125	125	supervision, rehabilitation, conservatorship, [or] receivership,
126	126	or other proceeding in which the company was found by a court of
127	127	competent jurisdiction to be insolvent or otherwise unable to pay
128	128	obligations as they come due, may not issue a new or renewal
129	129	insurance policy until the company:
130	130	(1) has repaid pro rata in full to each holder of a
131	131	participation receipt the assessment amount paid by the receipt
132	132	holder or its assignee; and
133	133	(2) has repaid in full the amount of guaranty fees paid
134	134	by the association.
135	135	(b) If an assessment has been made under this chapter for an
136	136	impaired agent or guaranty fees have been provided for the impaired
137	137	agent, the agent, on release from the supervision, conservatorship,
138	138	rehabilitation, [or] receivership, or other proceeding in which the
139	139	agent was found by a court of competent jurisdiction to be insolvent
140	140	or otherwise unable to pay obligations as they come due, subject to
141	141	dischargeability, may not act as an agent [issue a new or renewal
142	142	insurance policy] until the agent has repaid in full the amount of
143	143	guaranty fees paid by the association.
144	144	SECTION 10. Chapter 2602, Insurance Code, is amended by
145	145	adding Subchapter J to read as follows:
146	146	SUBCHAPTER J. ADDITIONAL DUTIES OF ASSOCIATION
147	147	Sec. 2602.451. APPLICABILITY. This subchapter applies, at
148	148	the commissioner's discretion and regardless of whether there are
149	149	covered claims against an agent, to any agent that is designated by
150	150	the commissioner as an impaired agent.
151	151	Sec. 2602.452. ACTIONS FOR CERTAIN AGENTS. (a) The
152	152	commissioner may direct the association, at the association's
153	153	expense and on behalf of an impaired agent, to:
154	154	(1) close real estate transactions;
155	155	(2) disburse escrow funds;
156	156	(3) record documents; and
157	157	(4) issue final title insurance policies.
158	158	(b) The association may employ or retain a person in
159	159	accordance with Section 2602.103(a).
160	160	Sec. 2602.453. AUTHORITY OF ASSOCIATION; COOPERATION OF
161	161	OFFICERS, OWNERS, AND EMPLOYEES. (a) On the direction of the
162	162	commissioner under Section 2602.452, the association may implement
163	163	any direction made by the commissioner and may access all books,
164	164	records, accounts, networks, and electronic document storage and
165	165	management systems as necessary to implement the commissioner's
166	166	direction.
167	167	(b) Any present or former officer, manager, director,
168	168	trustee, owner, employee, or agent of the agent, or any other person
169	169	with authority over or in charge of any segment of the agent's
170	170	affairs, shall cooperate with the association. For purposes of
171	171	this subsection:
172	172	(1) "Person" includes a person who exercised or
173	173	exercises control directly or indirectly over activities of the
174	174	agent through a holding company or other affiliate of the agent.
175	175	(2) "Cooperate" means:
176	176	(A) replying promptly in writing to any request
177	177	for information from the association within the period established
178	178	in the request; and
179	179	(B) making available to the association any
180	180	books, accounts, documents, or other records or information of, or
181	181	relating to, the agent within the period set in the request.
182	182	(c) A person who fails to cooperate as required under
183	183	Subsection (b) is subject to sanctions under Chapter 82, in
184	184	addition to all other sanctions available under law.
185	185	SECTION 11. Section 2651.002, Insurance Code, is amended by
186	186	amending Subsection (c) and adding Subsection (d) to read as
187	187	follows:
188	188	(c) The completed application must state that:
189	189	(1) the proposed agent is:
190	190	(A) an individual who is a bona fide resident of
191	191	this state;
192	192	(B) an association or firm composed only of Texas
193	193	residents; or
194	194	(C) a Texas corporation or a foreign corporation
195	195	authorized to engage in business in this state;
196	196	(2) the proposed agent has unencumbered assets in
197	197	excess of liabilities, exclusive of the value of abstract plants,
198	198	as required by Section 2651.012;
199	199	(3) [(2)] the proposed agent, including a
200	200	corporation's managerial personnel, if applicable, has reasonable
201	201	experience or instruction in the field of title insurance;
202	202	(4) [(3)] the title insurance company:
203	203	(A) knows that the proposed agent has a good
204	204	business reputation and is worthy of the public trust; and
205	205	(B) is unaware of any fact or condition that
206	206	disqualifies the proposed agent from receiving a license; and
207	207	(5) [(4)] the proposed agent qualifies as a title
208	208	insurance agent under this chapter.
209	209	(d) Except as provided by Section 2651.0021(e), an agent
210	210	applying for an initial license under this subchapter must provide
211	211	evidence that the agent and its management personnel have
212	212	successfully completed a professional training program that
213	213	complies with Section 2651.0021. The program must have been
214	214	completed within one year preceding the date of application.
215	215	SECTION 12. Subchapter A, Chapter 2651, Insurance Code, is
216	216	amended by adding Section 2651.0021 to read as follows:
217	217	Sec. 2651.0021. PROFESSIONAL TRAINING PROGRAM. (a) The
218	218	commissioner shall adopt by rule a professional training program
219	219	for a title insurance agent and the management personnel of the
220	220	title insurance agent.
221	221	(b) The professional training program must be designed to
222	222	provide information regarding:
223	223	(1) the basic principles and coverages related to
224	224	title insurance;
225	225	(2) recent and prospective changes in those principles
226	226	and coverages;
227	227	(3) applicable rules and laws;
228	228	(4) proper conduct of the license holder's title
229	229	insurance business;
230	230	(5) accounting principles and practices and financial
231	231	responsibilities and practices relevant to title insurance; and
232	232	(6) the duties and responsibilities of a title
233	233	insurance agent.
234	234	(c) Professional training program hours may be used to
235	235	satisfy the continuing education requirements established under
236	236	Section 2651.204.
237	237	(d) A professional training program course must be offered
238	238	by:
239	239	(1) a statewide title insurance association,
240	240	statewide title agents' association or professional association,
241	241	or local chapter of a statewide title insurance or title agents'
242	242	association or professional association;
243	243	(2) an accredited college or university;
244	244	(3) a career school or college as defined by Section
245	245	132.001, Education Code;
246	246	(4) the State Bar of Texas;
247	247	(5) an educational publisher;
248	248	(6) a title insurance company authorized to engage in
249	249	business in this state;
250	250	(7) a company that owns one or more title insurance
251	251	companies authorized to engage in business in this state;
252	252	(8) a public school system in this state; or
253	253	(9) an individual accredited as an instructor by an
254	254	entity described by Subdivisions (1)-(8).
255	255	(e) An individual is exempt from the professional training
256	256	requirement of this section if the individual has held in this state
257	257	for at least five years a position as management personnel with a
258	258	title insurance agent, or a comparable position, as determined
259	259	under rules adopted by the commissioner.
260	260	SECTION 13. Section 2651.011, Insurance Code, is amended to
261	261	read as follows:
262	262	Sec. 2651.011. PRIVILEGED COMMUNICATIONS; FINANCIAL
263	263	INFORMATION. (a) Any information, including a document, record,
264	264	or statement, and including information provided to or received
265	265	from the commissioner under Subsection (b) or (c), or any other
266	266	information required or permitted to be made or disclosed to or by
267	267	the department under this subchapter, other than Section 2651.001,
268	268	is not public information subject to Chapter 552, Government Code,
269	269	except to the extent described by Subsection (b), and is a
270	270	privileged communication and may not be disclosed to the public
271	271	except as evidence in an administrative hearing or proceeding.
272	272	This subsection does not apply to a document, record, or statement
273	273	required to be made or disclosed to the department under Chapter
274	274	36[:
275	275	[(1) a privileged communication; and
276	276	[(2) not admissible in evidence in a court action or
277	277	proceeding except under a subpoena issued by a court of record].
278	278	(b) A title insurance company may provide information to the
279	279	commissioner about a financial matter that would reasonably call
280	280	into question the solvency of a title agent that the title insurance
281	281	company appointed. Each title insurance company shall provide
282	282	annually to the department a list of officers authorized to provide
283	283	to the department the information under this subsection.
284	284	Information provided under this subsection is not subject to
285	285	Chapter 552, Government Code, except that the commissioner may
286	286	release information that the commissioner received under this
287	287	subsection to a title insurance company that has appointed, or that
288	288	is considering appointing, the title agent. The commissioner may
289	289	also release information that the commissioner received under this
290	290	subsection to a title agent under Section 2651.206, Insurance Code,
291	291	if the information is evidence on which an audit report or
292	292	examination report relies. A title insurance company that receives
293	293	information under this subsection may not release the information
294	294	except under a subpoena issued by a court of competent
295	295	jurisdiction.
296	296	(c) Each title insurance agent shall provide the
297	297	department, on a quarterly basis, with a copy of the agent's
298	298	quarterly withholding tax report furnished by the agent to the
299	299	United States Internal Revenue Service. The title insurance agent
300	300	must also provide to the department proof of the payment of the tax.
301	301	An agent that does not have employees shall certify to the
302	302	department on a quarterly basis that there has not been a material
303	303	change in the agent's financial condition.
304	304	(d) The commissioner by rule may prescribe the types of
305	305	information under Subsections (b) and (c) that are privileged under
306	306	Subsection (a).
307	307	SECTION 14. Subchapter A, Chapter 2651, Insurance Code, is
308	308	amended by adding Sections 2651.012 and 2651.013 to read as
309	309	follows:
310	310	Sec. 2651.012. UNENCUMBERED ASSETS. (a) In this section:
311	311	(1) "Principal office" means a principal office of the
312	312	business organization, unincorporated association, sole
313	313	proprietorship, or partnership in this state in which the decision
314	314	makers for the organization conduct the daily affairs of the
315	315	organization. The presence of an agency or representative does not
316	316	establish a principal office.
317	317	(2) "Unencumbered assets" means:
318	318	(A) cash or cash equivalents;
319	319	(B) liquid assets that have a readily
320	320	determinable market value and that do not have any lien against
321	321	them;
322	322	(C) real estate, in excess of any encumbrances;
323	323	(D) investments, such as mutual funds,
324	324	certificates of deposit, and stocks and bonds;
325	325	(E) a surety bond, the form and content of which
326	326	shall be prescribed by the commissioner in accordance with this
327	327	code;
328	328	(F) a deposit made in accordance with Section
329	329	2651.102; and
330	330	(G) a letter of credit that meets the
331	331	requirements of Section 493.104(b)(2)(C).
332	332	(b) The unencumbered assets required under this section are
333	333	reserves for contingencies. The reserves must be deducted from
334	334	premiums for purposes of proceedings conducted under Subchapter D,
335	335	Chapter 2703. The reserves may only be spent or released:
336	336	(1) as permitted by the commissioner if the agent is
337	337	declared impaired;
338	338	(2) if the agent merges or consolidates with another
339	339	agent who maintains the amount of unencumbered assets that would be
340	340	required for the survivor of the merger or consolidation;
341	341	(3) if the agent surrenders the agent's license under
342	342	Section 2651.201 and the rules adopted under that section; or
343	343	(4) if the agent is liquidated.
344	344	(c) Except as provided by Subsection (d), an agent must
345	345	maintain unencumbered assets with a market value in excess of
346	346	liabilities, exclusive of the value of abstract plants, in the
347	347	following amounts unless the commissioner establishes lesser
348	348	amounts by rule:
349	349	(1) if the agent maintains its principal office in a
350	350	county with a population of 10,000 or more but less than 50,000:
351	351	$25,000;
352	352	(2) if the agent maintains its principal office in a
353	353	county with a population of 50,000 or more but less than 200,000:
354	354	$50,000;
355	355	(3) if the agent maintains its principal office in a
356	356	county with a population of 200,000 or more but less than one
357	357	million: $100,000; and
358	358	(4) if the agent maintains its principal office in a
359	359	county with a population of one million or more: $150,000.
360	360	(d) Except as provided by the commissioner by rule, an agent
361	361	that maintains its principal office in a county with a population of
362	362	less than 10,000 is exempt from this section.
363	363	(e) An agent that maintains a principal office in more than
364	364	one county must meet the asset standards for the largest county for
365	365	which the agent will hold a license.
366	366	(f) An agent may elect to:
367	367	(1) maintain unencumbered assets as required by this
368	368	section; or
369	369	(2) place a deposit with the department as authorized
370	370	by Section 2652.102.
371	371	(g) An agent that holds a license on September 1, 2009, and
372	372	that has held the license for at least three years as of that date is
373	373	not required to comply with Subsection (c) on September 1, 2009, but
374	374	shall increase the unencumbered assets held by the agent, or make
375	375	and increase the required deposit, until the agent is in compliance
376	376	with the required capitalization amounts in accordance with the
377	377	schedule established under this subsection. The agent must hold
378	378	unencumbered assets, or make a deposit in an amount, such that:
379	379	(1) if the agent has been licensed at least three years
380	380	but less than four years:
381	381	(A) the agent has at least 33 percent of the
382	382	required capitalization amount on September 1, 2010;
383	383	(B) the agent has at least 66 percent of the
384	384	required capitalization amount on September 1, 2011; and
385	385	(C) the agent has at least 100 percent of the
386	386	required capitalization amount on September 1, 2012;
387	387	(2) if the agent has been licensed at least four years
388	388	but less than five years:
389	389	(A) the agent has at least 25 percent of the
390	390	required capitalization amount on September 1, 2010;
391	391	(B) the agent has at least 50 percent of the
392	392	required capitalization amount on September 1, 2011;
393	393	(C) the agent has at least 75 percent of the
394	394	required capitalization amount on September 1, 2012; and
395	395	(D) the agent has at least 100 percent of the
396	396	required capitalization amount on September 1, 2013;
397	397	(3) if the agent has been licensed at least five years
398	398	but less than six years:
399	399	(A) the agent has at least 20 percent of the
400	400	required capitalization amount on September 1, 2010;
401	401	(B) the agent has at least 40 percent of the
402	402	required capitalization amount on September 1, 2011;
403	403	(C) the agent has at least 60 percent of the
404	404	required capitalization amount on September 1, 2012;
405	405	(D) the agent has at least 80 percent of the
406	406	required capitalization amount on September 1, 2013; and
407	407	(E) the agent has at least 100 percent of the
408	408	required capitalization amount on September 1, 2014;
409	409	(4) if the agent has been licensed at least six years
410	410	but less than seven years:
411	411	(A) the agent has at least 16.66 percent of the
412	412	required capitalization amount on September 1, 2010;
413	413	(B) the agent has at least 33.32 percent of the
414	414	required capitalization amount on September 1, 2011;
415	415	(C) the agent has at least 49.98 percent of the
416	416	required capitalization amount on September 1, 2012;
417	417	(D) the agent has at least 66.64 percent of the
418	418	required capitalization amount on September 1, 2013;
419	419	(E) the agent has at least 83.3 percent of the
420	420	required capitalization amount on September 1, 2014; and
421	421	(F) the agent has at least 100 percent of the
422	422	required capitalization amount on September 1, 2015;
423	423	(5) if the agent has been licensed at least seven years
424	424	but less than eight years:
425	425	(A) the agent has at least 14.29 percent of the
426	426	required capitalization amount on September 1, 2010;
427	427	(B) the agent has at least 28.58 percent of the
428	428	required capitalization amount on September 1, 2011;
429	429	(C) the agent has at least 42.87 percent of the
430	430	required capitalization amount on September 1, 2012;
431	431	(D) the agent has at least 57.16 percent of the
432	432	required capitalization amount on September 1, 2013;
433	433	(E) the agent has at least 71.45 percent of the
434	434	required capitalization amount on September 1, 2014;
435	435	(F) the agent has at least 85.74 percent of the
436	436	required capitalization amount on September 1, 2015; and
437	437	(G) the agent has at least 100 percent of the
438	438	required capitalization amount on September 1, 2016;
439	439	(6) if the agent has been licensed at least eight years
440	440	but less than nine years:
441	441	(A) the agent has at least 12.5 percent of the
442	442	required capitalization amount on September 1, 2010;
443	443	(B) the agent has at least 25 percent of the
444	444	required capitalization amount on September 1, 2011;
445	445	(C) the agent has at least 37.5 percent of the
446	446	required capitalization amount on September 1, 2012;
447	447	(D) the agent has at least 50 percent of the
448	448	required capitalization amount on September 1, 2013;
449	449	(E) the agent has at least 62.5 percent of the
450	450	required capitalization amount on September 1, 2014;
451	451	(F) the agent has at least 75 percent of the
452	452	required capitalization amount on September 1, 2015;
453	453	(G) the agent has at least 87.5 percent of the
454	454	required capitalization amount on September 1, 2016; and
455	455	(H) the agent has at least 100 percent of the
456	456	required capitalization amount on September 1, 2017; and
457	457	(7) if the agent has been licensed at least nine years:
458	458	(A) the agent has at least 11.11 percent of the
459	459	required capitalization amount on September 1, 2010;
460	460	(B) the agent has at least 22.22 percent of the
461	461	required capitalization amount on September 1, 2011;
462	462	(C) the agent has at least 33.33 percent of the
463	463	required capitalization amount on September 1, 2012;
464	464	(D) the agent has at least 44.44 percent of the
465	465	required capitalization amount on September 1, 2013;
466	466	(E) the agent has at least 55.55 percent of the
467	467	required capitalization amount on September 1, 2014;
468	468	(F) the agent has at least 66.66 percent of the
469	469	required capitalization amount on September 1, 2015;
470	470	(G) the agent has at least 77.77 percent of the
471	471	required capitalization amount on September 1, 2016;
472	472	(H) the agent has at least 88.88 percent of the
473	473	required capitalization amount on September 1, 2017; and
474	474	(I) the agent has at least 100 percent of the
475	475	required capitalization amount on September 1, 2018.
476	476	(h) If the agent has been licensed less than three years as
477	477	of September 1, 2009, the agent must have:
478	478	(1) at least 50 percent of the required capitalization
479	479	amount required under Subsection (c) on September 1, 2010; and
480	480	(2) 100 percent of that required capitalization amount
481	481	on September 1, 2011.
482	482	(i) This subsection and Subsection (g) expire September 2,
483	483	2018.
484	484	(j) Notwithstanding any other provision of this section,
485	485	this section takes effect only after the commissioner adopts the
486	486	form, content, and procedures for use of the surety bond authorized
487	487	under Subsection (a). The commissioner by rule shall establish the
488	488	procedures for making, filing, using, and paying for the surety
489	489	bond. Notwithstanding Subsections (g) and (h), the commissioner by
490	490	rule may extend the dates established under those subsections as
491	491	necessary to comply with this subsection.
492	492	Sec. 2651.013. DIVISION OF PREMIUM HELD IN TRUST; RULES.
493	493	(a) The funds held by a title insurance agent that are owed to a
494	494	title insurance company, another title insurance agent, or a direct
495	495	operation arising from a division of premium, whether as determined
496	496	under rules adopted by the commissioner or by agreement among the
497	497	parties, are considered to be held in trust for the title insurance
498	498	company, other title insurance agent, or direct operation.
499	499	(b) This section does not require, and the commissioner may
500	500	not require by rule, that funds described by Subsection (a) be held
501	501	in a separate account subject to an external audit. This section
502	502	does not affect the department's or association's authority to
503	503	examine or audit a title agent or direct operation.
504	504	SECTION 15. Subchapter D, Chapter 2651, Insurance Code, is
505	505	amended by adding Section 2651.158 to read as follows:
506	506	Sec. 2651.158. CERTIFICATION OF UNENCUMBERED ASSETS. (a)
507	507	Unless the agent has elected to make a deposit with the department
508	508	under Section 2651.012(f), the annual audit of escrow accounts must
509	509	be accompanied by a certification by a certified public accountant
510	510	that the title insurance agent has the appropriate unencumbered
511	511	assets in excess of liabilities, exclusive of the value of its
512	512	abstract plants, as required by Section 2651.012.
513	513	(b) The commissioner by rule shall establish:
514	514	(1) a procedure to be used to determine the value of
515	515	categories of assets; and
516	516	(2) the method by which the certification required by
517	517	this section must be made which shall not include an audit of
518	518	operating accounts.
519	519	SECTION 16. Subchapter E, Chapter 2651, Insurance Code, is
520	520	amended by adding Sections 2651.205 and 2651.206 to read as
521	521	follows:
522	522	Sec. 2651.205. TITLE AGENT RECORDS. (a) A landlord or
523	523	storage facility, including electronic storage, that accepts
524	524	possession of an agent's guaranty file or other records takes
525	525	possession subject to:
526	526	(1) the right of access of the title insurance company
527	527	involved in the transaction that the file documents, during
528	528	customary business hours, for the purpose of copying the guaranty
529	529	file; and
530	530	(2) the obligation to maintain the confidentiality of
531	531	nonpublic information in the title insurance agent's records
532	532	according to state and federal laws that govern the title insurance
533	533	agent.
534	534	(b) If the title insurance agent has been designated
535	535	impaired, the Texas Title Insurance Guaranty Association has the
536	536	right to access the guaranty files and other records of the title
537	537	insurance agent, including electronic records, for 60 days from the
538	538	date of impairment, during customary business hours, for purposes
539	539	of copying those records.
540	540	(c) Except for the right of access granted under Subsections
541	541	(a) and (b), a lien created in favor of the landlord by contract or
542	542	otherwise is not impaired.
543	543	(d) For purposes of this section, "title insurance agent"
544	544	includes an agent owned wholly or partly by a title insurance
545	545	company and includes a direct operation.
546	546	Sec. 2651.206. EXAMINATION REPORTS. (a) An audit, review,
547	547	or examination conducted under this chapter or Chapter 2602 must be
548	548	conducted in accordance with rules adopted by the commissioner.
549	549	The rules must provide:
550	550	(1) that before a report from an examination, review,
551	551	or audit becomes final, the department will furnish to the title
552	552	agent or direct operation a copy of the report and any evidence on
553	553	which the report relies;
554	554	(2) a reasonable period of not less than 10 days after
555	555	the title agent or direct operation receives the report and
556	556	evidence from the department for the title agent or direct
557	557	operation to respond;
558	558	(3) an opportunity for an appeal under a process
559	559	similar to the process under Title 28, Part 1, Chapter 7, Subchapter
560	560	A, Texas Administrative Code; and
561	561	(4) procedures to ensure that the report and any
562	562	evidence regarding the report remain confidential and are
563	563	transmitted only to designated representatives of the title agent
564	564	or direct operation.
565	565	(b) The commissioner shall furnish the title agent or direct
566	566	operation with a draft of the report and a copy of any evidence not
567	567	later than the 10th day before the scheduled date of a meeting
568	568	requested by the department regarding a report.
569	569	(c) This section does not require the department to turn
570	570	over work papers. For purposes of this subsection, work papers are
571	571	the records of an auditor or examiner of the procedures followed,
572	572	the tests performed, the information obtained, and the conclusions
573	573	reached that are pertinent to the audit or examination. Work papers
574	574	include work programs, analyses, memoranda, letters of
575	575	confirmation and representation, abstracts of company documents
576	576	and schedules, and commentaries prepared or obtained by the auditor
577	577	or examiner that support the opinions of the auditor or examiner.
578	578	SECTION 17. Section 2703.202, Insurance Code, is amended by
579	579	adding Subsections (c), (d), (e), and (f) to read as follows:
580	580	(c) Except as provided by Subsection (d), a public hearing
581	581	held under Subsection (a) or under Section 2703.206 shall be
582	582	conducted by the commissioner as a rulemaking hearing under
583	583	Subchapter B, Chapter 2001, Government Code.
584	584	(d) Notwithstanding Subsection (c), at the request of a
585	585	title insurance company or the public insurance counsel, a public
586	586	hearing held under Subsection (a) or under Section 2703.206 must be
587	587	conducted by the commissioner as a contested case hearing under
588	588	Subchapters C through H and Subchapter Z, Chapter 2001, Government
589	589	Code.
590	590	(e) Information received or requested by the commissioner
591	591	as part of an individual audit or examination under Chapters 2602
592	592	and 2651 may not be used for rate setting under Subchapter D,
593	593	Chapter 2703. Nothing in this section prohibits a party from
594	594	conducting discovery in a ratemaking or other proceeding or
595	595	producing other information requested by the department, or
596	596	verifying the data reported under a statistical plan or report
597	597	promulgated by the commissioner.
598	598	(f) Subsections (c) through (e) apply only to a public
599	599	hearing held on or after January 1, 2009.
600	600	SECTION 18. Section 2602.056 and Section 2602.153(c),
601	601	Insurance Code, are repealed.
602	602	SECTION 19. An abstract plant that exists on September 1,
603	603	2009, but that does not, on that date, cover a period beginning not
604	604	later than January 1, 1979, as required by Section 2501.004,
605	605	Insurance Code, as amended by this Act, is not required to comply
606	606	with that section before January 1, 2014.
607	607	SECTION 20. Section 2651.158, Insurance Code, as added by
608	608	this Act, applies beginning with annual audits conducted under
609	609	Subchapter D, Chapter 2651, Insurance Code, for the 2011 calendar
610	610	year.
611	611	SECTION 21. The commissioner of insurance shall hold a
612	612	hearing not later than the 120th day after the effective date of
613	613	this Act. Not later than the 90th day after the date of that
614	614	hearing, the commissioner shall issue an order prescribing the
615	615	rules to be used in connection with Section 2651.206, Insurance
616	616	Code, as added by this Act.
617	617	SECTION 22. This Act takes effect September 1, 2009.
618	618	______________________________ ______________________________
619	619	President of the Senate Speaker of the House
620	620	I certify that H.B. No. 4338 was passed by the House on May 5,
621	621	2009, by the following vote: Yeas 144, Nays 0, 1 present, not
622	622	voting; and that the House concurred in Senate amendments to H.B.
623	623	No. 4338 on May 29, 2009, by the following vote: Yeas 143, Nays 0,
624	624	1 present, not voting.
625	625	______________________________
626	626	Chief Clerk of the House
627	627	I certify that H.B. No. 4338 was passed by the Senate, with
628	628	amendments, on May 25, 2009, by the following vote: Yeas 31, Nays
629	629	0.
630	630	______________________________
631	631	Secretary of the Senate
632	632	APPROVED: __________________
633	633	Date
634	634	__________________
635	635	Governor