S.B. No. 735
AN ACT
relating to prohibition of certain extra hazardous coverages by
title insurance companies.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter A, Chapter 2502, Insurance Code, is
amended by adding Section 2502.006 to read as follows:
Sec. 2502.006. CERTAIN EXTRA HAZARDOUS COVERAGES
PROHIBITED. (a) A title insurance company may not insure against
loss or damage sustained by reason of any claim that under federal
bankruptcy, state insolvency, or similar creditor's rights laws the
transaction vesting title in the insured as shown in the policy or
creating the lien of the insured mortgage is:
(1) a preference or preferential transfer under 11
U.S.C. Section 547;
(2) a fraudulent transfer under 11 U.S.C. Section 548;
(3) a transfer that is fraudulent as to present and
future creditors under Section 24.005, Business & Commerce Code, or
a similar law of another state; or
(4) a transfer that is fraudulent as to present
creditors under Section 24.006, Business & Commerce Code, or a
similar law of another state.
(b) The commissioner may by rule designate coverages that
violate this section. It is not a defense against a claim that a
title insurance company has violated this section that the
commissioner has not adopted a rule under this subsection.
(c) Title insurance issued in or on a form prescribed by the
commissioner shall be considered to comply with this section.
(d) Nothing in this section prohibits title insurance with
respect to liens, encumbrances, or other defects to title to land
that:
(1) appear in the public records before the date on
which the contract of title insurance is made;
(2) occur or result from transactions before the
transaction vesting title in the insured or creating the lien of the
insured mortgage; or
(3) result from failure to timely perfect or record
any instrument before the date on which the contract of title
insurance is made.
(e) A title insurance company may not engage in the business
of title insurance in this state if the title insurance company
provides insurance of the type prohibited by Subsection (a)
anywhere in the United States, except to the extent that the laws of
another state require the title insurance company to provide that
type of insurance.
SECTION 2. Section 2502.006, Insurance Code, as added by
this Act, applies only to an insurance policy that is delivered,
issued for delivery, or renewed on or after January 1, 2012. A
policy delivered, issued for delivery, or renewed 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 3. This Act takes effect September 1, 2011.
______________________________ ______________________________
President of the Senate Speaker of the House
I hereby certify that S.B. No. 735 passed the Senate on
March 17, 2011, by the following vote: Yeas 31, Nays 0.
______________________________
Secretary of the Senate
I hereby certify that S.B. No. 735 passed the House on
May 23, 2011, by the following vote: Yeas 142, Nays 0, one
present not voting.
______________________________
Chief Clerk of the House
Approved:
______________________________
Date
______________________________
Governor