By: Darby, et al. (Senate Sponsor - Harris) H.B. No. 2408
(In the Senate - Received from the House May 16, 2011;
May 16, 2011, read first time and referred to Committee on Business
and Commerce; May 20, 2011, reported adversely, with favorable
Committee Substitute by the following vote: Yeas 8, Nays 0;
May 20, 2011, sent to printer.)
COMMITTEE SUBSTITUTE FOR H.B. No. 2408 By: Harris
A BILL TO BE ENTITLED
AN ACT
relating to title insurance.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 2501, Insurance Code, is amended by
adding Section 2501.009 to read as follows:
Sec. 2501.009. GIFTS, GRANTS, AND DONATIONS FOR EDUCATIONAL
PURPOSES. (a) The department may accept gifts, grants, and
donations to enable employees of the department to participate in
educational events, and for other educational purposes, related to
title insurance.
(b) The commissioner may adopt rules related to the
acceptance of gifts, grants, and donations described in Subsection
(a).
SECTION 2. Section 2502.055(a), Insurance Code, is amended
to read as follows:
(a) The activities described in this section are not
rebates. Nothing in this subchapter prohibits a title insurance
company or a title insurance agent from:
(1) engaging in [legal] promotional and educational
activities that are not conditioned on the referral of title
insurance business and not prohibited by Subchapter B, Chapter 541;
(2) purchasing advertising promoting the title
insurance company or the title insurance agent at market rates from
any person in any publication, event, or media;
(3) delivering to a party in the transaction or the
party's representative legal documents or funds which are directly
or indirectly related to a transaction closed by the title
insurance company or title insurance agent; [or]
(4) participating in an association of attorneys,
builders, developers, realtors, or other real estate practitioners
provided that the level of such participation does not exceed
normal participation of a volunteer member of the association and
is not activity that would ordinarily be performed by paid staff of
an association; or
(5) providing continuing education courses at market
rates, regardless of whether participants receive credit hours.
SECTION 3. Section 2651.007, Insurance Code, is amended by
adding Subsections (d), (e), (f), and (g) to read as follows:
(d) Not later than the 20th business day after the date the
department receives a renewal application, the department shall
notify the applicant in writing of any deficiencies in the
application that render the renewal application incomplete.
(e) Not later than the fifth business day after the date the
renewal application is complete, the department shall notify the
applicant in writing of the date that the renewal application is
complete.
(f) A renewal application is automatically approved on the
30th business day after the date the renewal application is
complete, unless on or before that date the department notifies the
applicant in writing of the factual grounds on which the department
proposes to deny the license under Section 2651.301.
(g) The department may provide a notice required under this
section by e-mail.
SECTION 4. Section 2651.009, Insurance Code, is amended by
amending Subsection (c) and adding Subsections (c-1), (c-2), and
(c-3) to read as follows:
(c) Not later than the 20th business day after the date the
department receives a notice under Subsection (b), the department
shall notify the title insurance agent and appointing title
insurance company in writing of any deficiencies in the notice that
render the notice incomplete. A notice under Subsection (b) is
considered complete on the date the department receives the notice,
unless the department provides notice of the deficiencies under
this section.
(c-1) Not later than the fifth business day after the date
the notice under Subsection (b) is complete, the department shall
notify the title insurance agent and appointing title insurance
company in writing of the date that the notice under Subsection (b)
is complete.
(c-2) The appointment is effective on the eighth business
day following the date [the department receives] the [completed]
notice of appointment is complete and the department receives the
fee, unless the department proposes to reject [rejects] the
appointment. If the department proposes to reject [rejects] the
appointment, the department shall notify the title insurance agent
and the appointing title insurance company [state] in writing of
the factual grounds on which the department proposes to reject the
appointment [reasons for rejection] not later than the seventh
business day after the date on which the [department receives the
completed] notice of appointment is complete.
(c-3) The department may provide a notice required under
this section by e-mail.
SECTION 5. Subchapter G, Chapter 2651, Insurance Code, is
amended by adding Sections 2651.3015 and 2651.303 to read as
follows:
Sec. 2651.3015. PROHIBITED GROUNDS FOR REJECTION, DELAY, OR
DENIAL. (a) Except as provided by Subsection (b) or (c), the
department may not reject, delay, or deny a notice of appointment
under Section 2651.009 based wholly or partly on a pending
department audit or complaint investigation or a pending
disciplinary action against a title insurance agent or appointing
title insurance company that has not been finally closed or
resolved by a final order issued by the commissioner on or before
the date on which the notice is received by the department.
(b) The department may reject a notice of appointment under
Section 2651.009 if the department determines that the appointing
title insurance company or the title insurance agent intentionally
made a material misstatement in the notice of appointment or
attempted to have the appointment approved by fraud or
misrepresentation.
(c) The department may delay approval of a notice of
appointment if:
(1) the title insurance agent or the appointing title
insurance company is the subject of a criminal investigation or
prosecution; or
(2) the deputy commissioner of the title division of
the department makes a good faith determination that there is a
credible suspicion that there are ongoing or continuing acts of
fraud by the title insurance agent or appointing title insurance
company.
(d) Except as provided by Subsection (e) or (f), the
department may not delay or deny a renewal application under
Section 2651.007 based wholly or partly on a department audit or
complaint investigation of, or disciplinary or enforcement action
against, an applicant or license holder that is pending and has not
been finally closed or resolved by a final order issued by the
commissioner on or before the date on which the application is
complete.
(e) The department may deny a renewal application under
Section 2651.007 if the department determines that the applicant or
license holder intentionally made a material misstatement in the
renewal application or attempted to obtain the license renewal by
fraud or misrepresentation.
(f) The department may delay a renewal application if:
(1) the applicant or license holder is the subject of a
criminal investigation or prosecution; or
(2) the deputy commissioner of the title division of
the department makes a good faith determination that there is a
credible suspicion that there are ongoing or continuing acts of
fraud by the applicant or license holder.
Sec. 2651.303. NOTICE OF DISCIPLINARY OR ENFORCEMENT
ACTION; AUTOMATIC DISMISSAL. (a) The department shall notify a
license holder in writing of a disciplinary or enforcement action
against the license holder not later than the 30th business day
after the date the department assigns a file number to the action,
except that this subsection does not apply to a file or action:
(1) that is the subject of a pending criminal
investigation or prosecution; or
(2) about which the deputy commissioner of the title
division of the department makes a good faith determination that
there is a credible suspicion that there are ongoing or continuing
acts of fraud by a person who is the subject of the action.
(b) A notice required by Subsection (a) may be provided by
e-mail and must provide a license holder fair notice of the alleged
facts known by the department on the date of the notice that
constitute grounds for the action.
(c) A disciplinary or enforcement action is automatically
dismissed with prejudice, unless the department serves a notice of
hearing on the license holder not later than the 60th business day
after the date the department receives a hearing request from the
license holder.
(d) The department may provide information about an
enforcement action, including a copy of a notice issued under this
section, to each title insurance company with which a title
insurance agent has, or proposes to obtain, an appointment.
SECTION 6. Subchapter B, Chapter 2652, Insurance Code, is
amended by adding Section 2652.059 to read as follows:
Sec. 2652.059. DENIAL OF LICENSE APPLICATION OR LICENSE
RENEWAL; APPROVAL. (a) Not later than the 20th business day after
the date the department receives a license application or a license
renewal under this chapter, the department shall notify the
applicant or license holder in writing of any deficiencies in the
application that render the application incomplete.
(b) Not later than the fifth business day after the date the
application is complete, the department shall notify the applicant
or license holder in writing of the date that the license
application or license renewal is complete.
(c) An application is automatically approved on the 30th
business day after the date the application is complete, unless on
or before that date the department notifies the applicant or
license holder in writing of the factual grounds on which the
department proposes to deny the application.
(d) The department may provide a notice required under this
section by e-mail.
SECTION 7. Subchapter E, Chapter 2652, Insurance Code, is
amended by adding Sections 2652.2015 and 2652.203 to read as
follows:
Sec. 2652.2015. PROHIBITED GROUNDS FOR DELAY OR DENIAL.
(a) Except as provided by Subsection (b) or (c), the department
may not delay or deny a license application or a license renewal
based wholly or partly on a department audit or complaint
investigation of, or disciplinary or enforcement action against, a
license holder or applicant that is pending and has not been finally
closed or resolved by a final order issued by the commissioner on or
before the date on which the initial or renewal application is
complete.
(b) The department may delay a license application or
license renewal if:
(1) the applicant or license holder is the subject of a
criminal investigation or prosecution; or
(2) the deputy commissioner of the title division of
the department makes a good faith determination that there is a
credible suspicion that there are ongoing or continuing acts of
fraud by the applicant or license holder.
(c) The department may deny a license application or license
renewal if the department determines that the applicant or license
holder intentionally made a material misstatement in the license
application or license renewal or the applicant or license holder
attempted to obtain the license or renewal by fraud or
misrepresentation.
Sec. 2652.203. NOTICE OF DISCIPLINARY OR ENFORCEMENT
ACTION; AUTOMATIC DISMISSAL. (a) The department shall notify a
license holder of a disciplinary action or enforcement action
against the license holder not later than the 30th business day
after the date the department assigns a file number to the action,
except that this subsection does not apply to a file or action:
(1) that is the subject of a pending criminal
investigation or prosecution; or
(2) about which the deputy commissioner of the title
division of the department makes a good faith determination that
there is a credible suspicion that there are ongoing or continuing
acts of fraud by a person who is the subject of the action.
(b) A notice required by Subsection (a) must provide a
license holder fair notice of the alleged facts known by the
department on the date of the notice that constitute grounds for the
action.
(c) A disciplinary or enforcement action is automatically
dismissed with prejudice, unless the department serves a notice of
hearing on the license holder not later than the 60th business day
after the date the department receives a hearing request from the
license holder.
(d) The department may provide information about an
enforcement action, including a copy of a notice issued under this
section, to each title insurance agent or direct operation with
which an escrow officer has, or proposes to obtain, employment.
SECTION 8. Subchapter B, Chapter 2703, Insurance Code, is
amended by adding Section 2703.0515 to read as follows:
Sec. 2703.0515. CERTAIN REQUIREMENTS PROHIBITED. (a) A
title insurance company is not required to offer or provide in
connection with a title insurance policy an endorsement insuring a
loss from damage resulting from the use of the surface of the land
for the extraction or development of coal, lignite, oil, gas, or
another mineral if the policy includes a general exception or
exclusion from coverage a loss from damage resulting from the use of
the surface of the land for the extraction or development of coal,
lignite, oil, gas, or another mineral.
(b) In this section, "general exception or exclusion" means
a provision in a title insurance policy or other title insuring form
that provides that title insurance coverage under the policy or
form:
(1) is subject to, and the title insurer does not
insure title to, and excepts from the description of the covered
property, coal, lignite, oil, gas, and other minerals in and under
and that may be produced from the covered property, together with
related rights, privileges, and immunities; or
(2) does not cover a lease, grant, exception, or
reservation of coal, lignite, oil, gas, or other minerals, or
related rights, privileges, and immunities, appearing in the public
records.
(c) An additional premium or other amount may not be charged
for an endorsement to a loan policy of title insurance if the
endorsement:
(1) insures against loss from damage to improvements
or permanent buildings located on land that results from the future
exercise of any right existing on the date of the loan policy to use
the surface of the land for the extraction or development of coal,
lignite, oil, gas, or another mineral;
(2) expressly does not insure against loss resulting
from subsidence; and
(3) was promulgated by the commissioner in calendar
year 2009.
SECTION 9. Subchapter B, Chapter 2703, Insurance Code, is
amended by adding Sections 2703.055 and 2703.056 to read as
follows:
Sec. 2703.055. REQUIREMENT OF CERTAIN PROVISIONS
PROHIBITED. The commissioner may not require by rule, or through
adoption of a title insurance policy or other insuring form, that a
title insurance policy delivered or issued for delivery in this
state:
(1) insure against a loss that a person with an
interest in real property sustains from damage to the property by
reason of severance of minerals from the surface estate; or
(2) provide insurance as to ownership of minerals.
Sec. 2703.056. EXCEPTIONS; MINERAL INTERESTS.
(a) Subject to the underwriting standards of the title insurance
company, a title insurance company may in a commitment for title
insurance or a title insurance policy include a general exception
or a special exception to except from coverage a mineral estate or
an instrument that purports to reserve or transfer all or part of a
mineral estate.
(b) A reduction to, or credit on a premium charge for, a
policy of title insurance or other insuring form may not be directly
or indirectly based on an exclusion of, or general or special
exception to, a mineral estate in the title insurance policy.
(c) The inclusion in a title insurance policy of a general
exception or a special exception described by Subsection (a) does
not create title insurance coverage as to the condition or
ownership of the mineral estate.
SECTION 10. Section 2703.153, Insurance Code, is amended by
amending Subsection (d) and adding Subsections (h) and (i) to read
as follows:
(d) A title insurance company or a title insurance agent
aggrieved by a department requirement concerning the submission of
information may bring a suit in a district court in Travis County
alleging that the request for information:
(1) is unduly burdensome; or
(2) is not a request for information material to
fixing and promulgating premium rates or another matter that may be
the subject of the periodic [biennial] hearing and is not a request
reasonably designed to lead to the discovery of that information.
(h) The contents of the statistical report, including any
amendments to the statistical report, must be established in a
rulemaking hearing under Subchapter B, Chapter 2001, Government
Code.
(i) An amendment to the contents of the statistical report
may not apply retroactively.
SECTION 11. Section 2703.202, Insurance Code, is amended by
amending Subsections (b) and (d) and adding Subsections (g), (h),
(i), (j), (k), (l), (m), (n), and (o) to read as follows:
(b) The commissioner shall order a public hearing to
consider changing a premium rate, including fixing a new premium
rate, in response to a written [At the] request of:
(1) a title insurance company;
(2) an association composed of at least 50 percent of
the number of title insurance agents and title insurance companies
licensed or authorized by the department;
(3) an association composed of at least 20 percent of
the number of title insurance agents licensed or authorized by the
department; or
(4) the office of public insurance counsel[, the
commissioner shall order a public hearing to consider changing a
premium rate].
(d) Notwithstanding Subsection (c), [at the request of a
title insurance company or the public insurance counsel,] a public
hearing held under Subsection (a) or under Section 2703.206 must be
conducted by the commissioner as a contested case hearing under
Subchapters C through H and Subchapter Z, Chapter 2001, Government
Code, at the request of:
(1) a title insurance company;
(2) an association composed of at least 50 percent of
the number of title insurance agents and title insurance companies
licensed or authorized by the department;
(3) an association composed of at least 20 percent of
the number of title insurance agents licensed or authorized by the
department; or
(4) the office of public insurance counsel.
(g) If a hearing held under Subsection (a) is not conducted
as a contested case hearing, the commissioner shall render a
decision and issue a final order not later than the 120th day after
the date the commissioner receives a written request under
Subsection (b).
(h) If a hearing held under Subsection (a) is conducted as a
contested case hearing:
(1) not later than the 30th day after the date the
commissioner receives a request for a public hearing under
Subsection (b), the commissioner shall issue a notice of call for
items to be considered at the hearing;
(2) the commissioner may not require responses to the
notice of call before the 60th day after the date the commissioner
issues the notice of call;
(3) the commissioner shall issue a notice of public
hearing requested under Subsection (d) not later than the 30th day
after the date responses to the notice of call are required under
Subdivision (2);
(4) the commissioner shall commence the public hearing
not earlier than the 120th day after the date the commissioner
issues a notice of hearing under Subdivision (3);
(5) the commissioner shall close the public hearing
not later than the 150th day after the date the commissioner issues
the notice of hearing under Subdivision (3); and
(6) the commissioner shall render a decision and issue
a final order not later than the 60th day after the record made in
the public hearing is closed under Subdivision (5).
(i) A party's presentation of relevant, admissible oral
testimony in a hearing under this section may not be limited.
(j) The commissioner shall consider each matter presented
in a hearing under this section and announce in a public hearing all
decisions on all matters considered.
(k) A party described by Subsection (b) may petition a
district court in Travis County to enter an order requiring the
commissioner to comply with the deadlines described by this section
if the commissioner fails to meet a requirement in Subsection (g) or
(h).
(l) Subject to Subsection (m), if the commissioner fails to
comply with the requirements under Subsection (g) or (h)(6), a
combination of at least three associations, persons, or entities
listed in Subsection (b) may jointly petition a district court of
Travis County to adopt a rate based on the record made in the
hearing before the commissioner under this section.
(m) If the record made in the hearing before the
commissioner is not complete before the request for the court to
adopt a premium rate under Subsection (l), the court shall hold an
evidentiary hearing to establish a record before adopting the
premium rate.
(n) After a petition has been filed under Subsection (l),
the commissioner may not issue findings or an order related to the
subject matter of the petition until after the date the court enters
a final judgment.
(o) A district court may appoint a magistrate to adopt a
rate under this section.
SECTION 12. Section 2703.203, Insurance Code, is amended to
read as follows:
Sec. 2703.203. PERIODIC [BIENNIAL] HEARING. The
commissioner shall hold a [biennial] public hearing not earlier
than July 1 after the fifth anniversary of the closing of a hearing
held under this chapter [of each even-numbered year] to consider
adoption of premium rates and other matters relating to regulating
the business of title insurance that an association, title
insurance company, title insurance agent, or member of the public
admitted as a party under Section 2703.204 requests to be
considered or that the commissioner determines necessary to
consider.
SECTION 13. Section 2703.204, Insurance Code, is amended to
read as follows:
Sec. 2703.204. ADMISSION AS PARTY TO PERIODIC [BIENNIAL]
HEARING. (a) Subject to this section, a trade association whose
membership is composed of at least 20 percent of the members of an
industry or group represented by the trade association, an
association, a person or entity described by Section 2703.202(b),
or department staff [an individual or association or other entity
recommending adoption of a premium rate or another matter relating
to regulating the business of title insurance] shall be admitted as
a party to the periodic [biennial] hearing under Section 2703.203.
(b) A party to any portion of the periodic [the ratemaking
phase of the biennial] hearing relating to ratemaking may request
that the commissioner remove any other party to that portion of [the
ratemaking phase of] the hearing on the grounds that the other party
does not have a substantial interest in title insurance. A decision
of the commission to deny or grant the request is final and subject
to appeal in accordance with Section 36.202.
SECTION 14. Section 2703.207, Insurance Code, is amended to
read as follows:
Sec. 2703.207. NOTICE OF CERTAIN HEARINGS. Not later than
the 60th day before the date of a hearing under Section 2703.202,
2703.203, or 2703.206, notice of the hearing and of each item to be
considered at the hearing shall be:
(1) sent directly to all parties to the previous
hearing conducted under Section 2703.202, 2703.203, or 2703.206, if
the hearing was conducted as a contested case hearing [title
insurance companies and title insurance agents]; and
(2) published in the Texas Register and on the
department's Internet website [provided to the public in a manner
that gives fair notice concerning the hearing].
SECTION 15. Section 2703.205, Insurance Code, is repealed.
SECTION 16. Section 2703.0515, Insurance Code, as added by
this Act, applies only to a title insurance policy that is delivered
or issued for delivery on or after January 1, 2012. A policy
delivered or issued for delivery before January 1, 2012, 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 17. Sections 2703.055 and 2703.056, Insurance Code,
as added by this Act, apply only to a title insurance policy that is
delivered or issued for delivery on or after January 1, 2012. A
policy delivered or issued for delivery before January 1, 2012, 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 18. This Act takes effect September 1, 2011.
* * * * *