| 1 | 1 | | By: Carona S.B. No. 735 |
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| 2 | 2 | | (Smithee) |
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| 3 | 3 | | |
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| 4 | 4 | | |
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| 5 | 5 | | A BILL TO BE ENTITLED |
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| 6 | 6 | | AN ACT |
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| 7 | 7 | | relating to prohibition of certain extra hazardous coverages by |
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| 8 | 8 | | title insurance companies. |
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| 9 | 9 | | BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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| 10 | 10 | | SECTION 1. Subchapter A, Chapter 2502, Insurance Code, is |
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| 11 | 11 | | amended by adding Section 2502.006 to read as follows: |
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| 12 | 12 | | Sec. 2502.006. CERTAIN EXTRA HAZARDOUS COVERAGES |
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| 13 | 13 | | PROHIBITED. (a) A title insurance company may not insure against |
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| 14 | 14 | | loss or damage sustained by reason of any claim that under federal |
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| 15 | 15 | | bankruptcy, state insolvency, or similar creditor's rights laws the |
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| 16 | 16 | | transaction vesting title in the insured as shown in the policy or |
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| 17 | 17 | | creating the lien of the insured mortgage is: |
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| 18 | 18 | | (1) a preference or preferential transfer under 11 |
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| 19 | 19 | | U.S.C. Section 547; |
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| 20 | 20 | | (2) a fraudulent transfer under 11 U.S.C. Section 548; |
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| 21 | 21 | | (3) a transfer that is fraudulent as to present and |
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| 22 | 22 | | future creditors under Section 24.005, Business & Commerce Code, or |
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| 23 | 23 | | a similar law of another state; or |
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| 24 | 24 | | (4) a transfer that is fraudulent as to present |
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| 25 | 25 | | creditors under Section 24.006, Business & Commerce Code, or a |
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| 26 | 26 | | similar law of another state. |
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| 27 | 27 | | (b) The commissioner may by rule designate coverages that |
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| 28 | 28 | | violate this section. It is not a defense against a claim that a |
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| 29 | 29 | | title insurance company has violated this section that the |
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| 30 | 30 | | commissioner has not adopted a rule under this subsection. |
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| 31 | 31 | | (c) Title insurance issued in or on a form prescribed by the |
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| 32 | 32 | | commissioner shall be considered to comply with this section. |
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| 33 | 33 | | (d) Nothing in this section prohibits title insurance with |
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| 34 | 34 | | respect to liens, encumbrances, or other defects to title to land |
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| 35 | 35 | | that: |
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| 36 | 36 | | (1) appear in the public records before the date on |
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| 37 | 37 | | which the contract of title insurance is made; |
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| 38 | 38 | | (2) occur or result from transactions before the |
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| 39 | 39 | | transaction vesting title in the insured or creating the lien of the |
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| 40 | 40 | | insured mortgage; or |
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| 41 | 41 | | (3) result from failure to timely perfect or record |
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| 42 | 42 | | any instrument before the date on which the contract of title |
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| 43 | 43 | | insurance is made. |
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| 44 | 44 | | (e) A title insurance company may not engage in the business |
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| 45 | 45 | | of title insurance in this state if the title insurance company |
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| 46 | 46 | | provides insurance of the type prohibited by Subsection (a) |
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| 47 | 47 | | anywhere in the United States, except to the extent that the laws of |
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| 48 | 48 | | another state require the title insurance company to provide that |
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| 49 | 49 | | type of insurance. |
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| 50 | 50 | | SECTION 2. Section 2502.006, Insurance Code, as added by |
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| 51 | 51 | | this Act, applies only to an insurance policy that is delivered, |
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| 52 | 52 | | issued for delivery, or renewed on or after January 1, 2012. A |
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| 53 | 53 | | policy delivered, issued for delivery, or renewed before January 1, |
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| 54 | 54 | | 2012, is governed by the law as it existed immediately before the |
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| 55 | 55 | | effective date of this Act, and that law is continued in effect for |
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| 56 | 56 | | that purpose. |
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| 57 | 57 | | SECTION 3. This Act takes effect September 1, 2011. |
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