By: Jackson S.B. No. 2272
A BILL TO BE ENTITLED
AN ACT
relating to a lender's release of insurance proceeds.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 557.002, Insurance Code is amended to
read as follows:
Sec. 557.002. NOTIFICATION BY LENDER TO INSURED CONCERNING
INSURANCE PROCEEDS. (a) If a claim under an insurance policy for
damage to residential real property is paid to the insured and a
lender, and the lender holds all or part of the proceeds from the
insurance claim payment pending completion of all or part of the
repairs to the property, the lender shall specifically notify the
insured of each reasonable requirement with which the insured must
comply for the lender to release the insurance proceeds.
(b) The notice required under this section must be provided
not later than the 10th day after the date the lender receives
payment of the insurance proceeds.
SECTION 2. Section 557.003, Insurance Code is amended to
read as follows:
Sec. 557.003. LENDER'S RELEASE OR REFUSAL TO RELEASE
INSURANCE PROCEEDS. Not later than the 10th day after the date a
lender receives from the insured a request for release of all or
part of the insurance proceeds held by the lender, the lender shall:
(1) if the lender has received [sufficient] evidence
of the insured's compliance with the requirements specified by the
lender under Section 557.002 for release of the proceeds, release
to the insured, as requested, all or part of the proceeds; or
(2) provide notice to the insured that explains
specifically:
(A) the good faith reason for the lender's
refusal to release the proceeds to the insured; and
(B) each requirement as specified by the lender
under Section 557.002 with which the insured must comply for the
lender to release the proceeds.
SECTION 3. Section 557.004, Insurance Code is amended to
read as follows:
Sec. 557.004. LIABILITY FOR VIOLATION OF SUBCHAPTER.
(a) If a lender is not in compliance with this subchapter, the
lender is liable to pay insured the proceeds held by the lender,
interest at the rate of 18 percent a year on the proceeds held by the
lender as damages, together with reasonable attorney's fees.
(b) If a suit is filed, the attorney's fees shall be taxed as
part of the costs in the case. [PAYMENT OF INTEREST; RATE. A lender
who fails to provide notice as required by Section 557.002 or
557.003 or to release insurance proceeds as required by Section
557.003 shall pay to the insured interest at the rate of 10 percent
a year on the proceeds held by the lender.]
SECTION 4. Section 557.005, Insurance Code is amended to
read as follows:
Sec. 557.005. REMEDIES NOT EXCLUSIVE. The remedies
provided by this subchapter are in addition to any other remedy or
procedure provided by law or at common law. [ACCRUAL OF INTEREST.
(a) If a lender fails to provide notice as required by Section
557.002 or 557.003, interest begins to accrue on the date the lender
received the insurance proceeds.
(b) If a lender fails to release insurance proceeds as
required by Section 557.003, interest begins to accrue on the date
the lender receives sufficient evidence of the insured's compliance
with the requirements specified by the lender under Section 557.002
or 557.003 for release of the proceeds.
(c) Interest stops accruing on the date the lender complies
with Section 557.002 or 557.003, as applicable.]
SECTION 5. Section 557.006, Insurance Code is repealed.