2011S0613-1 03/08/11
By: Harris S.B. No. 1824
A BILL TO BE ENTITLED
AN ACT
relating to the regulation of title insurance; providing criminal
and administrative penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. The heading to Chapter 2501, Insurance Code, is
amended to read as follows:
CHAPTER 2501. GENERAL PROVISIONS; OPERATION AND ADMINISTRATION OF
TITLE INSURANCE
SECTION 2. Chapter 2501, Insurance Code, is amended by
designating Sections 2501.001 through 2501.008 as Subchapter A and
adding a heading for Subchapter A to read as follows:
SUBCHAPTER A. GENERAL PROVISIONS
SECTION 3. Subsection (a), Section 2501.002, Insurance
Code, is amended to read as follows:
(a) The purpose of this title is to completely regulate the
business of title insurance on real property and, as described by
Subtitle F, on personal property, including the direct issuance of
policies and the reinsurance of any assumed risks, to:
(1) protect consumers and purchasers of title
insurance policies; [and]
(2) provide adequate and reasonable rates of return
for title insurance companies and title insurance agents; and
(3) promote the growth, availability, and solvency of
entities or individuals willing to engage in the business of title
insurance in this state.
SECTION 4. Section 2501.003, Insurance Code, is amended by
adding Subdivisions (2-a), (2-b), and (3-a) to read as follows:
(2-a) "Commissioner" means the commissioner of title
insurance.
(2-b) "Commissioner of insurance" means the
commissioner of insurance of the department.
(3-a) "Division" means the division of title insurance
of the department.
SECTION 5. Section 2501.004, Insurance Code, is amended to
read as follows:
Sec. 2501.004. ABSTRACT PLANT; JOINT ABSTRACT PLANT
OPERATION. (a) For purposes of this title, the division
[department] shall define "abstract plant" and "joint abstract
plant operation."
(b) To provide for the safety and protection of
policyholders, the division [department] shall require that an
abstract plant:
(1) be geographically arranged;
(2) cover a period beginning not later than January 1,
1979, and be kept current; and
(3) be adequate for use in insuring titles, as
determined by the department.
SECTION 6. Chapter 2501, Insurance Code, is amended by
adding Subchapters B, C, D, and E to read as follows:
SUBCHAPTER B. GENERAL ADMINISTRATION; TITLE INSURANCE DIVISION
Sec. 2501.101. ADMINISTRATION OF SYSTEM: TEXAS DEPARTMENT
OF INSURANCE; TITLE INSURANCE DIVISION. (a) Except as otherwise
provided by this title, the department is the state agency
designated to:
(1) issue licenses and enforce compliance with the
organization of title insurance companies under Subtitle B; and
(2) oversee the financial solvency of the title
insurance system in this state as provided by Subtitle C.
(b) The division of title insurance is established as a
division within the Texas Department of Insurance to administer and
regulate the title insurance business in this state as provided by
this title, including:
(1) the licensing and regulation of title insurance
professionals under Subtitle D;
(2) the regulation of the business of title insurance
under Subtitle E, including promulgating rates and forms; and
(3) the regulation of title insurance for personal
property interests under Subtitle F, including fixing and
promulgating premium rates and forms for personal property title
policies.
Sec. 2501.102. RELATIONSHIP BETWEEN COMMISSIONER OF
INSURANCE AND COMMISSIONER OF TITLE INSURANCE; SEPARATION OF
AUTHORITY; RULEMAKING. (a) The division is administered by the
commissioner of title insurance as provided by this
subchapter. Except as otherwise provided by this title, the
commissioner of title insurance shall exercise all executive
authority, including rulemaking authority, under this title.
(b) The commissioner of insurance shall develop and
implement policies that clearly separate the respective
responsibilities of the department and the division.
(c) The commissioner of insurance may provide advice,
research, and commentary regarding the adoption of rules by the
commissioner of title insurance under this subtitle.
Sec. 2501.103. ACTIVITIES OF THE STATE AUDITOR. (a) The
division is subject to audit by the state auditor in accordance with
Chapter 321, Government Code. The state auditor may audit:
(1) the structure and internal controls of the
division;
(2) the level and quality of service provided by the
division to employers, injured employees, insurance carriers,
self-insured governmental entities, and other participants;
(3) the implementation of statutory requirements by
the division;
(4) employee turnover;
(5) information management systems, including public
access to nonconfidential information;
(6) the adoption and implementation of administrative
rules by the commissioner; and
(7) determinations of the occurrence of
administrative violations and the penalties for those violations.
(b) Nothing in this section limits the authority of the
state auditor under Chapter 321, Government Code.
Sec. 2501.104. ADMINISTRATIVE ATTACHMENT TO DEPARTMENT.
(a) The division is administratively attached to the department.
(b) The department shall provide the staff and facilities
necessary to enable the division to perform its duties under this
title, including:
(1) administrative assistance and services, including
budget planning and purchasing;
(2) personnel and financial services; and
(3) computer equipment and support.
(c) The commissioner and the commissioner of insurance may
enter into agreements as necessary to implement this title.
Sec. 2501.105. DUTIES OF DIVISION; SINGLE POINT OF CONTACT.
(a) In addition to other duties required under this title, the
division shall:
(1) regulate and administer the business of title
insurance in this state;
(2) ensure that the provisions of this title and other
laws regarding title insurance are executed; and
(3) adopt or promulgate rates, rating rules, policy
forms, manual rules, and other procedural rules.
(b) The commissioner of title insurance shall on a regular
basis, but not less often then every three years conduct a public
hearing to consider and adopt new rules.
Sec. 2501.106. COMPOSITION OF DIVISION. (a) The division
is composed of the commissioner and other officers and employees as
required to efficiently implement:
(1) this title;
(2) other title insurance laws of this state; and
(3) other laws that grant jurisdiction or that are
otherwise applicable to the division or the commissioner; and
(4) enforcement of this title, other title insurance
laws and regulations implementing those laws, and other laws that
grant jurisdiction or that are otherwise applicable to the division
or the commissioner.
(b) Enforcement activity under Subsection (a)(4) shall be
by employees within the division or by nonaffiliated attorneys in
the private practice of law.
Sec. 2501.107. CHIEF EXECUTIVE. (a) The commissioner is
the division's chief executive and chief administrative
officer. The commissioner shall administer and enforce this
title, other title insurance laws of this state, and other laws that
grant jurisdiction to or that are otherwise applicable to the
division or the commissioner.
(b) The commissioner has the powers and duties vested in the
division by this title and other title insurance laws of this state.
(c) Division staff shall report to the commissioner.
Sec. 2501.108. APPOINTMENT; TERM. (a) The governor, with
the advice and consent of the senate, shall appoint the
commissioner. The commissioner serves a two-year term that
expires on February 1 of each odd-numbered year.
(b) The governor shall appoint the commissioner without
regard to the race, color, disability, sex, religion, age, or
national origin of the appointee.
Sec. 2501.109. QUALIFICATIONS. The commissioner must:
(1) be a competent and experienced administrator;
(2) be well informed and qualified in the field of
title insurance;
(3) have at least five years of experience as an
executive in the administration of business or government or as a
practicing attorney, real estate agent, or certified public
accountant; and
(4) not have been an employee of the department or the
office of public insurance counsel.
Sec. 2501.110. INELIGIBILITY FOR PUBLIC OFFICE. The
commissioner is ineligible to be a candidate for a public elective
office in this state unless the commissioner has resigned and the
governor has accepted the resignation.
Sec. 2501.111. COMPENSATION. The commissioner is entitled
to compensation as provided by the General Appropriations Act.
Sec. 2501.112. GROUNDS FOR REMOVAL. (a) It is a ground for
removal from office that the commissioner:
(1) does not have at the time of appointment the
qualifications required by Section 2501.109;
(2) does not maintain during service as commissioner
the qualifications required by Section 2501.109;
(3) violates a prohibition established by Sections
2501.113, 2501.115, 2501.117, or 2501.118; or
(4) cannot because of illness or incapacity discharge
the commissioner's duties for a substantial part of the
commissioner's term.
(b) The validity of an action of the commissioner or the
division is not affected by the fact that it is taken when a ground
for removal of the commissioner exists.
Sec. 2501.113. PROHIBITED GIFTS; ADMINISTRATIVE VIOLATION.
(a) The commissioner or an employee of the division may not accept
a gift, a gratuity, or entertainment from a person having an
interest in a matter or proceeding pending before the division.
(b) A violation of Subsection (a) is an administrative
violation and constitutes a ground for removal from office or
termination of employment.
Sec. 2501.114. CIVIL LIABILITY OF COMMISSIONER. The
commissioner is not liable in a civil action for an act performed in
good faith in the execution of duties as commissioner.
Sec. 2501.115. CONFLICT OF INTEREST. (a) In this section,
"Texas trade association" means a cooperative and voluntarily
joined statewide association of business or professional
competitors in this state designed to assist its members and its
industry or profession in dealing with mutual business or
professional problems and in promoting their common interest.
(b) A person may not serve as commissioner and may not be a
division employee employed in a "bona fide executive,
administrative, or professional capacity" as that phrase is used
for purposes of establishing an exemption to the overtime
provisions of the federal Fair Labor Standards Act of 1938 (29
U.S.C. Section 201 et seq.) if:
(1) the person is an officer, employee, or paid
consultant of a Texas trade association in the field of title
insurance; or
(2) the person's spouse is an officer, manager, or paid
consultant of a Texas trade association in the field of title
insurance.
Sec. 2501.116. PROHIBITION ON CERTAIN EMPLOYMENT OR
REPRESENTATION. (a) A former commissioner or former employee of
the division involved in hearing cases under this title may not
represent a person before the division or a court in a matter:
(1) in which the former commissioner or employee was
personally involved while associated with the division; or
(2) that was within the former commissioner's or
employee's official responsibilities while the former commissioner
or employee was associated with the division.
(b) The prohibition under Subsection (a)(2) applies until
the:
(1) second anniversary of the date the former
commissioner ceased to serve as the commissioner; and
(2) first anniversary of the date the former
employee's employment with the division ceased.
(c) The prohibition under Subsection (a)(1) applies to a
current commissioner or employee of the division while the
commissioner or employee is involved in hearing cases under this
title and at any time thereafter.
(d) A person commits an offense if the person violates this
section. An offense under this section is a Class A misdemeanor.
Sec. 2501.117. LOBBYING ACTIVITIES. A person may not serve
as commissioner or act as general counsel to the commissioner if the
person is required to register as a lobbyist under Chapter 305,
Government Code, because of the person's activities for
compensation related to the operation of the department or the
division.
Sec. 2501.118. TRAINING PROGRAM FOR COMMISSIONER. (a) Not
later than the 90th day after the date the commissioner takes
office, the commissioner shall complete a training program that
complies with this section.
(b) The training program must provide the commissioner with
information regarding:
(1) the legislation that created the division;
(2) the programs operated by the division;
(3) the role and functions of the division;
(4) the rules of the commissioner of insurance
relating to the division, with an emphasis on the rules that relate
to disciplinary and investigatory authority;
(5) the current budget for the division;
(6) the results of the most recent formal audit of the
division;
(7) the requirements of:
(A) the open meetings law, Chapter 551,
Government Code;
(B) the public information law, Chapter 552,
Government Code;
(C) the administrative procedure law, Chapter
2001, Government Code; and
(D) other laws relating to public officials,
including conflict-of-interest laws; and
(8) any applicable ethics policies adopted by the
division or the Texas Ethics Commission.
Sec. 2501.119. GENERAL POWERS AND DUTIES OF COMMISSIONER.
(a) The commissioner shall conduct the daily operations of the
division and otherwise implement division policy.
(b) The commissioner or the commissioner's designee may:
(1) investigate misconduct;
(2) hold hearings, except that all rate matters shall
be heard by the commissioner;
(3) issue subpoenas to compel the attendance of
witnesses and the production of documents;
(4) administer oaths;
(5) take testimony directly or by deposition or
interrogatory;
(6) assess and enforce penalties established under
this title;
(7) enter appropriate orders as authorized by this
title;
(8) institute an action in the division's name to
enjoin a violation of this title;
(9) initiate an action to intervene in a judicial
proceeding;
(10) prescribe the form, manner, and procedure for the
transmission of information to the division;
(11) correct clerical errors in the entry of orders;
and
(12) exercise other powers and perform other duties as
necessary to implement and enforce this title.
Sec. 2501.120. PUBLIC INTEREST INFORMATION. (a) The
commissioner shall prepare information of public interest
describing the functions of the division and the procedures by
which complaints are filed with and resolved by the division.
(b) The commissioner shall make the information available
to the public and appropriate state agencies.
(c) The commissioner by rule shall ensure that each division
form, standard letter, and brochure under this title:
(1) is written in plain language;
(2) is in a readable and understandable format; and
(3) complies with all applicable requirements
relating to minimum readability requirements.
(d) The division shall make informational materials
described by this section available in English and Spanish.
Sec. 2501.121. COMPLAINT INFORMATION. (a) The
commissioner shall:
(1) adopt rules regarding the filing of a complaint
under this title against an individual or entity subject to
regulation by the division under this title; and
(2) ensure that information regarding the complaint
process is available on the division's Internet website.
(b) The rules adopted under this section must, at a minimum:
(1) ensure that the division clearly defines by rule
the method for filing a complaint; and
(2) define what constitutes a frivolous complaint
under this title.
(c) The division shall develop and post on the division's
Internet website:
(1) a simple standardized form for filing complaints
under this title; and
(2) information regarding the complaint filing
process.
(d) The division shall keep an information file about each
written complaint filed with the division under this title that is
unrelated to a specific title insurance claim, including a
complaint regarding the administration of the title insurance
system. The information must include:
(1) the date the complaint is received;
(2) the name of the complainant;
(3) the subject matter of the complaint;
(4) a record of all persons contacted in relation to
the complaint;
(5) a summary of the results of the review or
investigation of the complaint; and
(6) for complaints for which the division took no
action, an explanation of the reason the complaint was closed
without action.
(e) For each written complaint that is unrelated to a
specific title insurance claim that the division has authority to
resolve, the division shall provide to the person filing the
complaint and the person about whom the complaint is made
information about the division's policies and procedures under this
title relating to complaint investigation and resolution. The
division, at least quarterly and until final disposition of the
complaint, shall notify those persons about the status of the
complaint unless the notice would jeopardize an undercover
investigation.
(f) The commissioner shall create a schedule of fines for
late filings of statistical reports, trust fund audits, guaranty
fees, and escrow officer applications. The schedule of fines shall
be administered by the division. A fine may not exceed $50,000
unless a licensee has been found guilty of the same offense at least
three times over a period of years prescribed by the commissioner.
Subsequent offenses shall be handled through the normal complaint
process described by this section.
Sec. 2501.122. PRIORITIES FOR COMPLAINT INVESTIGATIONS.
(a) The division shall assign priorities to complaint
investigations under this title based on risk. In developing
priorities under this section, the division shall develop a
formal, risk-based complaint investigation system that considers:
(1) the severity of the alleged violation;
(2) whether the alleged violator showed continued or
wilful noncompliance; and
(3) whether an order of the commissioner has been
violated.
(b) The commissioner may develop additional risk-based
criteria as determined necessary.
Sec. 2501.123. PUBLIC PARTICIPATION. (a) The
commissioner shall develop and implement policies that provide the
public with a reasonable opportunity to appear before the division
and to speak on issues under the general jurisdiction of the
division.
(b) The division shall comply with federal and state laws
related to program and facility accessibility.
(c) In addition to the policies implemented under
Subsection (a), the commissioner shall prepare and maintain a
written plan that describes how a person who does not speak English
may be provided reasonable access to the division's programs and
services.
Sec. 2501.124. ADOPTION OF RULES. The commissioner shall
adopt rules as necessary for the implementation and enforcement of
this title.
Sec. 2501.125. ACCEPTANCE OF GIFTS, GRANTS, AND DONATIONS.
The division may accept gifts, grants, and donations as provided by
rules adopted by the commissioner.
Sec. 2501.126. FEES. In addition to fees established by
this title, the commissioner shall set reasonable fees for services
provided to persons requesting services from the division.
Sec. 2501.127. RECOMMENDATIONS TO LEGISLATURE. (a) The
commissioner shall consider and recommend to the legislature
changes to this title relating to title insurance.
(b) The commissioner shall forward the recommended changes
to the legislature not later than December 1 of
each even-numbered year.
Sec. 2501.128. LEGISLATIVE OVERSIGHT. The legislature may
adopt requirements relating to legislative oversight of the
division and the title insurance system of this state. The
division shall comply with any requirements adopted by the
legislature under this section.
Sec. 2501.129. ADVISORY COMMITTEES. The commissioner may
appoint advisory committees as the commissioner considers
necessary.
Sec. 2501.130. ANNUAL REPORT. (a) The commissioner shall
prepare annually a complete and detailed written report accounting
for all funds received and disbursed by the commission during the
preceding fiscal year.
(b) The report must meet the requirements applicable to
financial reporting that are provided under the General
Appropriations Act.
Sec. 2501.131. SANCTIONS. (a) Except as provided by
Subsection (b), the division may impose sanctions against any
person regulated by the division under this title.
(b) Only the commissioner may impose:
(1) a sanction suspending for more than 30 days or
revoking a license, certification, or permit required for a
licensed title agent or escrow officer in the field of title
insurance; or
(2) an administrative penalty on a licensed title
insurance company, title insurance agent, direct operation, or
escrow officer for violation of requirements relating to rates,
rules, or forms promulgated by the commissioner.
(c) The commissioner of insurance may impose sanctions for
violations of other titles of this code.
Sec. 2501.132. COOPERATION WITH STATE OFFICE OF
ADMINISTRATIVE HEARINGS. (a) The commissioner and the chief
administrative law judge of the State Office of Administrative
Hearings by rule shall adopt a memorandum of understanding
governing administrative procedure law hearings under this title
conducted by the State Office of Administrative Hearings in the
manner provided for a contested case hearing under Chapter 2001,
Government Code. The memorandum of understanding shall establish
the rules for discovery, qualification and cross-examination of
witnesses, and the types and quality of data and information
presented.
(b) In a case in which a rate hearing is conducted in
accordance with this title, the administrative law judge who
conducts the hearing for the State Office of Administrative
Hearings shall propose a decision to the commissioner for final
consideration not later than the 60th day after the close of the
hearing. A proposal for decision of the administrative law judge
becomes final unless the proposal for decision is changed by the
commissioner on or before the 60th day after the final proposal for
decision is received by the commissioner.
(c) In a contested case in which a sanction is conducted in
accordance with this title, the administrative law judge who
conducts the contested case hearing for the State Office of
Administrative Hearings shall propose a decision to the
commissioner for final consideration not later than the 60th day
after the close of the hearing. A proposal for decision of the
administrative law judge becomes final unless the proposal for
decision is changed by the commissioner on or before the 90th day
after the proposal for decision is received by the commissioner.
Sec. 2501.133. GENERAL DUTIES; FUNDING. (a) The division
shall perform the regulatory and licensing functions for title
agents, direct operations, and escrow officers of the title
insurance system of this state.
(b) The department shall perform the licensing functions
for title insurance companies.
(c) The operations of the division and the department under
this section are funded through the maintenance fee assessed under
Chapter 271.
Sec. 2501.134. APPEAL OF COMMISSIONER ACTION. (a) A
company or person qualified or seeking to qualify under this title
who is aggrieved by an action of the commissioner, including any
action against the company or person, may file an appeal of the
commissioner's action in a district court in Travis County.
(b) The appeal must be filed not later than the 30th day
after the date the commissioner issues the order or ruling, except
that if the order or ruling is directed against the company or
person, regardless of whether it is directed against any other
party, the company or person has 30 days after the date of receipt
of official notice of the commissioner's action to review the
action.
(c) An appeal under this section is subject to the same
standard of review as an appeal under Section 36.203.
SUBCHAPTER C. PERSONNEL
Sec. 2501.201. APPOINTMENTS. (a) Subject to the General
Appropriations Act or other law, the commissioner shall appoint
deputies, assistants, and other personnel as necessary to carry out
the powers and duties of the commissioner and the division under
this title, other title insurance laws of this state, and other laws
that grant jurisdiction or that are otherwise applicable to the
division or the commissioner.
(b) A person appointed under Subsection (a) must have the
professional, administrative, and title insurance experience
necessary to qualify for the position to which the person is
appointed.
Sec. 2501.202. DIVISION OF RESPONSIBILITIES. The
commissioner shall develop and implement policies that clearly
define the respective responsibilities of the commissioner and the
staff of the division.
Sec. 2501.203. CAREER LADDER; ANNUAL PERFORMANCE
EVALUATIONS. (a) The commissioner or the commissioner's designee
shall develop an intra-agency career ladder program that addresses
opportunities for mobility and advancement for employees within the
division. The program shall require intra-agency postings of all
positions concurrently with any public posting.
(b) The commissioner or the commissioner's designee shall
develop a system of annual performance evaluations that are based
on documented employee performance. All merit pay for division
employees must be based on the system established under this
subsection.
Sec. 2501.204. EQUAL EMPLOYMENT OPPORTUNITY POLICY
STATEMENT. (a) The commissioner or the commissioner's designee
shall prepare and maintain a written policy statement to ensure
implementation of a program of equal employment opportunity under
which all personnel transactions are made without regard to race,
color, disability, sex, religion, age, or national origin. The
policy statement must include:
(1) personnel policies, including policies related to
recruitment, evaluation, selection, appointment, training, and
promotion of personnel that are in compliance with Chapter 21,
Labor Code;
(2) a comprehensive analysis of the division workforce
that meets federal and state guidelines;
(3) procedures by which a determination may be made of
significant underuse in the division workforce of all persons for
whom federal or state guidelines encourage a more equitable
balance; and
(4) reasonable methods to appropriately address those
areas of underuse.
(b) A policy statement prepared under this section must:
(1) cover an annual period;
(2) be updated annually;
(3) be reviewed by the civil rights division of the
Texas Workforce Commission for compliance with Subsection (a)(1);
and
(4) be filed with the Texas Workforce Commission.
(c) The Texas Workforce Commission shall deliver a biennial
report to the legislature based on the information received under
Subsection (b). The report may be submitted separately or as part
of other biennial reports to the legislature.
SUBCHAPTER D. GENERAL POWERS AND DUTIES OF DIVISION AND
COMMISSIONER
Sec. 2501.301. DELEGATION OF RIGHTS AND DUTIES. Except as
expressly provided by this subtitle, the division may not delegate
the rights and duties imposed by this subchapter.
Sec. 2501.302. QUALIFICATIONS AND STANDARDS OF CONDUCT
INFORMATION. The commissioner or the commissioner's designee shall
provide to division employees, as often as the commissioner or
designee considers necessary, information regarding their:
(1) qualifications for office or employment under this
subtitle; and
(2) responsibilities under applicable law relating to
standards of conduct for state officers or employees.
SUBCHAPTER E. RECORDS AND EMPLOYEE INFORMATION
Sec. 2501.401. DIVISION RECORDS. (a) The commissioner is
the custodian of the division's records and shall perform the
duties of a custodian required by law, including providing copies
and the certification of records.
(b) The division shall comply with records retention
schedules provided under Section 441.185, Government Code.
(c) A record maintained by the division may be preserved in
any format permitted by Chapter 441, Government Code, and rules
adopted by the Texas State Library and Archives Commission under
that chapter.
(d) The division may charge a reasonable fee for making
available for inspection any of its information that contains
confidential information that must be redacted before the
information is made available. However, when a request for
information is for the inspection of 10 or fewer pages and a copy of
the information is not requested, the division may charge only the
cost of making a copy of the page from which confidential
information must be redacted. The fee for access to information
under Chapter 552, Government Code, shall be in accordance with the
rules of the attorney general that prescribe the method for
computing the charge for copies under that chapter.
SECTION 7. Subchapter A, Chapter 2502, Insurance Code, is
amended by adding Section 2502.0021 to read as follows:
Sec. 2502.0021. COVERAGE FOR MINERALS NOT REQUIRED.
(a) An insurance company may not be required to insure against
loss or damage by reason of severance of minerals from the surface
estate. An insurance company may, provided that its underwriting
standards are met, generally except or otherwise specifically
except, on a commitment for title insurance or a policy of title
insurance, to one or more instruments that purport to reserve or
transfer all or part of the mineral estate, but such exceptions do
not provide title insurance coverage as to the condition or
ownership of the excepted mineral estate.
(b) The commissioner may not adopt a rule or form requiring
insurance as to ownership of minerals.
SECTION 8. Section 2551.003, Insurance Code, is amended by
adding Subsection (c) to read as follows:
(c) The commissioner of insurance, after consultation with
the commissioner, may adopt and enforce rules on the insolvency of
entities engaged in the business of title insurance.
SECTION 9. Section 2551.152, Insurance Code, is amended to
read as follows:
Sec. 2551.152. ANNUAL STATEMENT. (a) Not later than March
1 of each year, each title insurance company shall file with the
commissioner of insurance a verified statement.
(b) The statement must be in a form required by the
commissioner of insurance and must:
(1) provide a statement of the business engaged in by
the title insurance company during the preceding year; and
(2) describe the condition of the company's affairs on
December 31 of the preceding year.
SECTION 10. Subsection (a), Section 2551.258, Insurance
Code, is amended to read as follows:
(a) The commissioner of insurance may:
(1) reevaluate the adequacy of the statutory premium
reserves required under Section 2551.253; and
(2) based on an actuarial review, change by order the
amount of the statutory premium reserve required of any domestic
title insurer or all domestic title insurers.
SECTION 11. Subsection (a), Section 2551.351, Insurance
Code, is amended to read as follows:
(a) A foreign or domestic corporation forfeits any right to
engage in business in this state if the corporation:
(1) issues any form of title insurance policy, or any
other adopted or approved form, on real property in this state other
than a form prescribed by the department;
(2) charges any premium rate on an owner, mortgagee,
or other title insurance policy, or on any other adopted or approved
form, on real property in this state other than a premium rate
prescribed by the commissioner; or
(3) otherwise engages in the business of title
insurance in relation to real property in this state on a form or
for a premium rate not prescribed by the division [department] or
commissioner.
SECTION 12. Section 2551.352, Insurance Code, is amended to
read as follows:
Sec. 2551.352. REVOCATION OF PERMIT AND FORFEITURE OF
CHARTER. (a) A domestic corporation engaged in the business of
title insurance that violates this title is subject to:
(1) revocation by the commissioner of insurance of the
corporation's permit; and
(2) forfeiture of the corporation's charter.
(b) A foreign corporation engaged in the business of title
insurance that violates this title is subject to revocation by the
commissioner of insurance of the corporation's permit.
SECTION 13. Subsections (a) and (c), Section 2551.353,
Insurance Code, are amended to read as follows:
(a) If the commissioner of insurance determines that a
domestic or foreign corporation that holds a certificate of
authority to engage in business in this state has violated this
title, the commissioner shall notify the company that the
commissioner of insurance intends to revoke the company's
certificate of authority on the expiration of the 30-day period
following the date actual notice is delivered or mailed under this
section.
(c) If a company receiving notice under this section does
not fully comply before the expiration of the period described by
Subsection (a), the commissioner of insurance shall revoke the
company's certificate of authority.
SECTION 14. Subsections (a) and (b), Section 2551.354,
Insurance Code, are amended to read as follows:
(a) A company qualified or seeking to qualify under this
title and aggrieved by an action of the commissioner of insurance,
including any action against the company, may file an appeal of the
commissioner of insurance's [commissioner's] action in a district
court in Travis County.
(b) The appeal must be filed not later than the 30th day
after the date the commissioner of insurance issues the order or
ruling, except that if the order or ruling is directed against the
company, whether or not directed against any other party, the
company has 30 days after the date of receipt of official notice of
the commissioner of insurance's [commissioner's] action to review
the action.
SECTION 15. Subsection (a), Section 2552.202, Insurance
Code, is amended to read as follows:
(a) An attorney's title insurance company shall certify to
the department and the division the name and address of each title
attorney appointed by the attorney's title insurance company.
SECTION 16. Subdivisions (5) and (6), Section 2602.003,
Insurance Code, are amended to read as follows:
(5) "Impaired agent" means a title agent or direct
operation that is designated by the commissioner of insurance as an
impaired agent and is:
(A) placed by a court in this state or another
state under an order of supervision, conservatorship,
rehabilitation, or liquidation;
(B) placed under an order of supervision or
conservatorship under Chapter 441;
(C) placed under an order of rehabilitation or
liquidation under Chapter 443; or
(D) otherwise found by a court of competent
jurisdiction to be insolvent or otherwise unable to pay obligations
as they come due.
(6) "Impaired title insurance company" means a title
insurance company that is designated by the commissioner of
insurance as an impaired title insurance company and is:
(A) placed by a court in this state or another
state under an order of supervision, conservatorship,
rehabilitation, or liquidation;
(B) placed under an order of supervision or
conservatorship under Chapter 441;
(C) placed under an order of rehabilitation or
liquidation under Chapter 443; or
(D) otherwise found by a court of competent
jurisdiction to be insolvent or otherwise unable to pay obligations
as they come due.
SECTION 17. Subsection (a), Section 2602.008, Insurance
Code, is amended to read as follows:
(a) Liability does not exist and a cause of action does not
arise against any of the following persons for a good faith action
or omission of the person in exercising the person's powers and
performing the person's duties under this chapter:
(1) the commissioner, the commissioner of insurance,
or the [commissioner's] representative of the commissioner or the
commissioner of insurance;
(2) the association or the association's agent or
employee;
(3) a title insurance company or the company's agent or
employee;
(4) a board member; and
(5) a special deputy receiver or the special deputy
receiver's agent or employee.
SECTION 18. Sections 2602.010 and 2602.011, Insurance Code,
are amended to read as follows:
Sec. 2602.010. RULES. The commissioner of insurance shall
adopt reasonable rules as necessary to implement and supplement
this chapter and its purposes.
Sec. 2602.011. INFORMATION PROVIDED BY AND TO COMMISSIONER.
(a) The commissioner of insurance shall notify the association and
the commissioner of the existence of an impaired title insurance
company or impaired agent not later than the third day after the
date on which the commissioner of insurance gives notice of the
designation of impairment to the impaired agent or impaired title
insurance company. The association is entitled to a copy of any
complaint seeking an order of receivership with a finding of
insolvency against a title insurance company at the time the
complaint is filed with a court.
(b) The commissioner of insurance shall notify the board
when the commissioner of insurance receives a report from the
commissioner of insurance or other analogous officer of another
state that indicates that a title insurance company 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.
(c) The commissioner of insurance shall report to the board
and the commissioner when the commissioner of insurance has
reasonable cause to believe from a completed or continuing
examination of any title insurance company that the company may be
an impaired title insurance company. The board may use this
information in performing its duties under this chapter. The board
shall keep the report and the information contained in the report
confidential until it is made public by the commissioner of
insurance or other lawful authority.
(d) On the board's request, the commissioner of insurance
shall provide the association with a statement of the net direct
written premiums of each title insurance company.
(e) The commissioner of insurance may require that the
association notify the insureds of the impaired title insurance
company and any other interested party of the designation of
impairment and of the person's rights under this chapter.
Notification by publication in a newspaper of general circulation
is sufficient notice under this section.
SECTION 19. Subsections (a), (b), and (d), Section 2602.12,
Insurance Code, are amended to read as follows:
(a) A title insurance company may appeal to the commissioner
of insurance an action or ruling of the association relating to an
assessment.
(b) An action or ruling of the commissioner of insurance
under this chapter may be appealed as provided by Subchapter D,
Chapter 36.
(d) Venue in a suit relating to an action or ruling under
this chapter is in Travis County. Each party to the action may
appeal, and the appeal is at once returnable to the appellate court
and has precedence over all cases of a different character pending
before the court. The commissioner of insurance or association is
not required to give an appeal bond in an appeal of a cause of action
arising under this chapter.
SECTION 20. Subsection (a), Section 2602.052, Insurance
Code, is amended to read as follows:
(a) The association's powers are exercised through a board
of directors consisting of nine individuals appointed by the
commissioner of insurance.
SECTION 21. Subsection (d), Section 2602.054, Insurance
Code, is amended to read as follows:
(d) The commissioner of insurance shall appoint an
individual to fill a vacancy on the board for the unexpired term.
SECTION 22. Subsection (c), Section 2602.102, Insurance
Code, is amended to read as follows:
(c) If the association does not submit a suitable amendment
to the plan of operation, the commissioner after notice and hearing
may adopt reasonable rules as necessary or advisable to implement
this chapter. A rule adopted by the commissioner continues in
effect unless [until] modified by the commissioner of insurance or
superseded by an amendment submitted by the association and
approved by the commissioner of insurance.
SECTION 23. Subsections (b) and (c), Section 2602.103,
Insurance Code, are amended to read as follows:
(b) On the [commissioner's] request of the commissioner of
insurance, the association shall retain one or more persons to:
(1) audit and review agent escrow and trust accounts,
financial condition, and compliance with applicable statutes and
rules; and
(2) report to the commissioner of insurance on the
accounts, condition, and compliance.
(c) A person retained under Subsection (b) acts solely under
the direction of and as assigned by the commissioner of insurance.
SECTION 24. Subsection (a), Section 2602.111, Insurance
Code, is amended to read as follows:
(a) The plan of operation may provide that, on approval of
the board and the commissioner of insurance, a power or duty of the
association may be delegated to a corporation or other organization
that:
(1) performs or will perform in two or more states
functions similar to those of the association or its equivalent;
and
(2) provides protection not substantially less
favorable and effective than that provided by this chapter.
SECTION 25. Sections 2602.113, 2602.114, and 2602.115,
Insurance Code, are amended to read as follows:
Sec. 2602.113. DETECTION AND PREVENTION OF IMPAIRMENT.
(a) The board may make recommendations to the commissioner of
insurance and the commissioner for detecting and preventing title
insurance company or agent impairments. The board shall advise and
counsel with the commissioner and the commissioner of insurance on
matters relating to the solvency of title insurance companies and
agents.
(b) The board may report and make recommendations to the
commissioner and the commissioner of insurance relating to any
matter germane to the solvency, liquidation, rehabilitation, or
conservation of a title insurance company or agent. A report or
recommendation under this subsection is not a public document until
a title insurance company is designated impaired.
(c) The board shall notify the commissioner of insurance of
any information indicating that a title insurance company or agent
may be unable or potentially unable to fulfill its contractual
obligations and shall request a meeting with the commissioner. The
board may request appropriate investigation and action by the
commissioner or the commissioner of insurance. The commissioner
and the commissioner of insurance may investigate and act as the
commissioner and the commissioner of insurance consider
[considers] appropriate.
Sec. 2602.114. MEETING OF BOARD ON IMPAIRED TITLE INSURANCE
COMPANY OR AGENT. (a) The commissioner of insurance:
(1) shall call a meeting of the board when the
commissioner of insurance determines that a title insurance company
or agent is insolvent or impaired; and
(2) may call a meeting of the board when the
commissioner of insurance determines that a title insurance company
or agent is in danger of becoming insolvent or impaired.
(b) The meeting is not open to the public. Only board
members, the commissioner of insurance, and persons the
commissioner of insurance authorizes may attend the meeting.
(c) The commissioner of insurance may require an officer,
director, or employee of the title insurance company or agent to
appear before the board for conference or to give testimony.
(d) At the meeting the commissioner of insurance may
disclose to the board information that the commissioner of
insurance possesses and may disclose department records, including
an examination report or a preliminary report from an examiner that
relates to the title insurance company or agent.
(e) A board member may not disclose information received in
the meeting unless authorized by the commissioner of insurance or
required as witness in court. A board member and the meeting are
subject to the confidentiality standard imposed on an examiner
under Sections 401.105 and 401.106, except that a bond is not
required of a board member.
Sec. 2602.115. ASSOCIATION AND BOARD ADVICE AND ASSISTANCE.
(a) On the [commissioner's] request of the commissioner of
insurance, the board shall attend hearings before the commissioner
of insurance and meet with and advise the commissioner of insurance
or the receiver or the conservator appointed by the commissioner of
insurance on matters relating to:
(1) the affairs of an impaired title insurance company
or agent;
(2) action that the commissioner of insurance,
receiver, or conservator may take to best protect the interest of
holders of covered claims against the company or agent; and
(3) the marshalling of assets.
(b) On the [commissioner's] request of the commissioner of
insurance, the association may assist and advise the commissioner
of insurance concerning rehabilitation, payment of claims,
continuation of coverage, or the performance of other contractual
obligations of an impaired title insurance company or agent.
SECTION 26. Section 2602.117, Insurance Code, is amended to
read as follows:
Sec. 2602.117. BOARD REPORT AT CONCLUSION OF IMPAIRMENT.
At the conclusion of a title insurance company or agent impairment
in which the association exercised its powers or performed its
duties under this chapter, the board shall prepare, from
information available to the association, and submit to the
commissioner of insurance a report on the history and causes of the
impairment.
SECTION 27. Section 2602.154, Insurance Code, is amended to
read as follows:
Sec. 2602.154. ENFORCEMENT OF FEE. (a) After notice and
opportunity for hearing, the commissioner of insurance may suspend
or revoke the certificate of authority or license to engage in
business in this state of a title insurance company or agent that
does not comply with this subchapter.
(b) The commissioner of insurance shall adopt rules that
implement the program created under this subchapter.
SECTION 28. Subsection (a), Section 2602.201, Insurance
Code, is amended to read as follows:
(a) If the commissioner of insurance determines that a title
insurance company or agent has become impaired, the association
shall promptly estimate the amount of additional money needed to
supplement the assets of the impaired title insurance company or
agent to pay all covered claims and administrative expenses.
SECTION 29. Section 2602.204, Insurance Code, is amended to
read as follows:
Sec. 2602.204. EXEMPTION FOR IMPAIRED TITLE INSURANCE
COMPANY. A title insurance company is exempt from assessment
during the period beginning on the date the commissioner of
insurance designates the company as an impaired title insurance
company and ending on the date the commissioner of insurance
determines that the company is no longer an impaired title
insurance company.
SECTION 30. Subsections (b) and (d), Section 2602.209,
Insurance Code, are amended to read as follows:
 (b) On failure of a title insurance company to pay an
assessment when due, the commissioner of insurance may either:
(1) suspend or revoke, after notice and hearing, the
company's certificate of authority to engage in business in this
state; or
(2) assess an administrative penalty as provided by
Chapter 84 in an amount not to exceed the greater of five percent of
the unpaid assessment each month or $100 each month.
(d) The commissioner of insurance may collect an assessment
on behalf of the association through a suit brought for that
purpose.
SECTION 31. Sections 2602.451 and 2602.452, Insurance Code,
are amended to read as follows:
Sec. 2602.451. APPLICABILITY. This subchapter applies, at
the [commissioner's] discretion of the commissioner of insurance
and regardless of whether there are covered claims against an
agent, to any agent that is designated by the commissioner of
insurance as an impaired agent.
Sec. 2602.452. ACTIONS FOR CERTAIN AGENTS. (a) The
commissioner of insurance may direct the association, at the
association's expense and on behalf of an impaired agent, to:
(1) close real estate transactions;
(2) disburse escrow funds;
(3) record documents; and
(4) issue final title insurance policies.
(b) The association may employ or retain a person in
accordance with Section 2602.103(a).
SECTION 32. Subsection (a), Section 2602.453, Insurance
Code, is amended to read as follows:
(a) On the direction of the commissioner of insurance under
Section 2602.452, the association may implement any direction made
by the commissioner of insurance and may access all books, records,
accounts, networks, and electronic document storage and management
systems as necessary to implement the [commissioner's] direction.
SECTION 33. Section 2651.007, Insurance Code, is amended by
adding Subsections (d) and (e) to read as follows:
(d) The department may not delay or deny a license renewal
because of a pending enforcement action against a license
applicant.
(e) A license renewal will be deemed granted 60 days after
the completed renewal application is received by the department if
no reason is given to the applicant for license denial under Section
2651.301.
SECTION 34. Section 2651.203, Insurance Code, is amended by
amending Subsection (b) and adding Subsection (c) to read as
follows:
(b) The department shall prescribe the form of the
disclosure required by this section. A form that applies to a title
insurance company shall require only the name of the president, the
name of an executive vice president, or the names of a senior vice
president, the treasurer, and the secretary.
(c) A title insurance agent or direct operation shall not
later than the 15th day after receiving a license from the
department, provide written notice of the license to all title
insurance agents and direct operations in the county for which the
agent or operation is licensed and all adjoining counties. The
notice shall also be provided to all title insurance companies
licensed in this state. The department may prescribe the form of
any notice required by this section.
SECTION 35. Section 2651.301, Insurance Code, is amended to
read as follows:
Sec. 2651.301. GROUNDS FOR LICENSE DENIAL OR DISCIPLINARY
ACTION. (a) The department may deny an application for a license
or discipline a title insurance agent or direct operation under
Sections 4005.102, 4005.103, and 4005.104 if the department
determines that the applicant or license holder has:
(1) wilfully violated this title;
(2) intentionally made a material misstatement in the
license application;
(3) obtained or attempted to obtain the license by
fraud or misrepresentation;
(4) misappropriated or converted to the applicant's or
license holder's own use or illegally withheld money belonging to a
title insurance company, an insured, or another person;
(5) been guilty of fraudulent or dishonest practices;
(6) materially misrepresented the terms and
conditions of a title insurance policy or contract; or
(7) failed to maintain:
(A) a separate and distinct accounting of escrow
funds; and
(B) an escrow bank account or accounts separate
and apart from all other accounts.
(b) The department shall notify a licensee or any applicant
for licensure of any enforcement action not later than the 20th day
after the initiation of the action.
(c) If the applicant or licensee responds to the notification
and the department fails to take further action or to respond within
60 days after the applicant's or licensee's response, the
enforcement is deemed dismissed for lack of prosecution.
SECTION 36. Subchapter G, Chapter 2651, Insurance Code, is
amended by adding Section 2651.303 to read as follows:
Sec. 2651.303. LICENSE APPROVAL. (a) The department may
not delay or deny license approval because of a pending enforcement
action against a license applicant.
(b) A license will be deemed granted 60 days after the
completed application form is received by the department if no
reason is given to the applicant for license denial under Section
2651.301.
SECTION 37. Section 2652.201, Insurance Code, is amended by
adding Subsections (c) and (d) to read as follows:
(c) The department may not delay nor deny a license
application or renewal because of a pending enforcement action
against the applicant.
(d) A license application or renewal will be deemed granted
60 days after the completed renewal application is received by the
department if no reason is given to the applicant for license denial
under Section 2651.301.
SECTION 38. Subchapter E, Chapter 2652, Insurance Code, is
amended by adding Section 2652.203 to read as follows:
Sec. 2652.203. NOTICE OF DISCIPLINARY ACTION. (a) The
department shall notify a licensee or any applicant for licensure
of any enforcement action not later than the 20th day after the
initiation of the action.
(b) If the applicant or licensee responds to the notification
and the department fails to take further action or respond within 60
days after the applicant's or licensee's response, the enforcement
is deemed dismissed for want of prosecution.
SECTION 39. Section 2703.152, Insurance Code, is amended by
amending Subsection (b) and adding Subsections (c), (d), and (e) to
read as follows:
(b) The premium rates fixed by the commissioner must [be]:
(1) be just and reasonable as to the public; [and]
(2) be nonconfiscatory as to title insurance companies
and title insurance agents;
(3) provide a reasonable margin of profit for title
insurance companies and title insurance agents; and
(4) not be excessive, inadequate, or unfairly
discriminatory as to insureds, title insurance companies, or title
insurance agents under this chapter or as described by this
section.
(c) A rate is excessive if the rate is likely to produce a
long-term profit that is unreasonably high in relation to the
insurance coverage provided.
(d) A rate is inadequate if:
(1) the rate is insufficient to sustain projected
losses and expenses to which the rate applies; and
(2) continued use of the rate:
(A) would endanger the solvency of a title
insurance company or title insurance agent using the rate; or
(B) would have the effect of substantially
lessening competition or creating a monopoly in a market.
(e) A rate is unfairly discriminatory if the rate:
(1) is not based on sound actuarial principles;
(2) does not bear a reasonable relationship to the
expected loss and expense experience among risks; or
(3) is based wholly or partly on the race, creed,
color, ethnicity, or national origin of the policyholder or an
insured.
SECTION 40. Section 2703.153, Insurance Code, is amended by
amending Subsection (b) and adding Subsection (h) to read as
follows:
(b) The information must be submitted in the form prescribed
by the division [department]. The division may not request
personal or corporate federal tax returns.
(h) Information to be used in the setting of rates shall be
obtained only through the statistical information required by rule
to be kept and reported to the commissioner on an annual basis.
When new or different information is added to the statistical
report, the application of the information shall be prospective
only and shall not be used until at least three years after the date
the information has been collected by the department.
SECTION 41. Subsection (d), Section 2703.202, Insurance
Code, is amended to read as follows:
(d) Notwithstanding Subsection (c), at the written request
of a title insurance company or a trade association that represents
at least 25 title insurance agents or title insurance companies
doing business in this state that is filed with the division before
the 31st day after the date notice is sent [the public insurance
counsel], a public hearing held under Subsection (a) or under
Section 2703.206 may [must] be conducted by the commissioner as a
contested case hearing under Subchapters C through H and Subchapter
Z, Chapter 2001, Government Code. The commissioner shall conduct a
hearing at least every fifth year after January 1, 2012.
SECTION 42. The heading to Section 2703.205, Insurance
Code, is amended to read as follows:
Sec. 2703.205. PHASES OF [BIENNIAL] HEARING.
SECTION 43. Section 2703.205, Insurance Code, is amended by
amending Subsections (a) and (e) and adding Subsection (h) to read
as follows:
(a) The [biennial] hearing consists of:
(1) a rulemaking phase to consider rules, forms,
endorsements, and related matters that do not have rate
implications; and
(2) a ratemaking phase to consider fixing of premium
rates and other matters that have rate implications.
(e) The ratemaking phase of the hearing shall be conducted
as a contested case in accordance with Chapter 2001, Government
Code, and subject to the agreement between the commissioner and the
State Office of Administrative Hearings.
(h) If the hearing is held before the State Office of
Administrative Hearings, the administrative law judge shall render
a proposal for decision in the ratemaking phase of the hearing not
later than the 60th day after the date the hearing is finally closed
unless the date is extended for an additional 60-day period with the
consent of all parties.
SECTION 44. Subchapter E, Chapter 2703, Insurance Code, is
amended by adding Section 2703.2055 to read as follows:
Sec. 2703.2055. COMMISSIONER ACTION. (a) Not later than
the 60th day after the date a proposal for decision is filed with
the division under this subchapter, the commissioner shall either:
(1) issue an order or decision approving the proposal
for decision, if the commissioner determines that the proposed rate
complies with the requirements of this chapter and the commissioner
provides notice to all parties of the decision or order as provided
by Section 2001.142, Government Code; or
(2) if the commissioner determines that the proposed
rate does not comply with the requirements of this chapter, the
commissioner shall amend the proposal for decision, issue an order
or decision with a rate, findings, or conclusions of law that comply
with the requirements of this chapter, and provide notice to all
parties of the decision or order as provided by Section 2001.142,
Government Code.
(b) The commissioner may amend findings of fact in a
proposal for decision under Subsection (a) only if the commissioner
determines that:
(1) a particular finding of fact is based on no
reliable or credible evidence in the records as a whole; or
(2) a particular finding of fact is affected by error
of law.
(c) If a proposal for decision has not been approved or
disapproved by the commissioner before the expiration of
the 60-day period described by Subsection (a), the rate, findings,
and conclusions of law in the proposal for decision shall be
considered final and may not be changed by the commissioner without
the written consent of all parties. On written motion filed by a
party with the State Office of Administrative Hearings that a
proposal for decision has not been accepted or amended as provided
by Subsection (a), the office shall provide notification of the
decision or order as provided by Section 2001.142, Government Code,
and that the decision may become final under Section 2001.144,
Government Code.
SECTION 45. (a) Except as provided by Section 46 of this
Act, the commissioner of title insurance of the Texas Department of
Insurance shall adopt rules implementing the applicable provisions
of Title 11, Insurance Code, as amended by this Act, not later than
June 1, 2012.
(b) Rules in effect under Title 11, Insurance Code, on the
effective date of this Act remain in effect until superseded by
rules adopted under Subsection (a) of this section.
SECTION 46. (a) Not later than June 1, 2012, the
commissioner of title insurance of the Texas Department of
Insurance shall conduct a hearing to allow interested parties to
make recommendations regarding rules to be adopted under the
memorandum of understanding required under Section 2501.132,
Insurance Code, as added by this Act.
(b) The commissioner of title insurance of the Texas
Department of Insurance and the chief administrative law judge of
the State Office of Administrative Hearings shall enter into the
memorandum of understanding described by Subsection (a) of this
section as soon as practicable after the date the hearing is
conducted as provided by that subsection.
SECTION 47. This Act takes effect January 1, 2012.