Texas 2019 - 86th Regular

Texas House Bill HB1614 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New		Differences
1		-	H.B. No. 1614
	1	+	By: Oliverson, et al. (Senate Sponsor - Creighton) H.B. No. 1614
	2	+	(In the Senate - Received from the House May 6, 2019;
	3	+	May 6, 2019, read first time and referred to Committee on Business &
	4	+	Commerce; May 19, 2019, reported favorably by the following vote:
	5	+	Yeas 7, Nays 0; May 19, 2019, sent to printer.)
	6	+	Click here to see the committee vote
2	7
3	8
	9	+	A BILL TO BE ENTITLED
4	10		AN ACT
5	11		relating to the operation of the Texas Title Insurance Guaranty
6	12		Association.
7	13		BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
8	14		SECTION 1. Section 2602.008(a), Insurance Code, is amended
9	15		to read as follows:
10	16		(a) Liability does not exist and a cause of action does not
11	17		arise against any of the following persons for a good faith action
12	18		or omission of the person in exercising the person's powers and
13	19		performing the person's duties under this chapter:
14	20		(1) the commissioner or the commissioner's
15	21		representative;
16	22		(2) the association or the association's agent,
17	23		representative, or employee;
18	24		(3) a title insurance company or the company's agent or
19	25		employee;
20	26		(4) a board member; and
21	27		(5) a special deputy receiver or the special deputy
22	28		receiver's agent or employee.
23	29		SECTION 2. Subchapter A, Chapter 2602, Insurance Code, is
24	30		amended by adding Section 2602.013 to read as follows:
25	31		Sec. 2602.013. VENUE. An action against the association or
26	32		an action against the association's board member, agent,
27	33		representative, or employee that arises from the exercise of the
28	34		person's powers or performance of the person's duties under this
29	35		chapter must be brought in a district court in Travis County.
30	36		SECTION 3. Section 2602.057(a), Insurance Code, is amended
31	37		to read as follows:
32	38		(a) A title insurance company is not prohibited, because the
33	39		company has an officer, director, or employee serving as a board
34	40		member, from negotiating for or entering into a contract of
35	41		reinsurance or assumption of liability or a contract of
36	42		substitution to provide for liabilities for covered claims with the
37	43		association, the commissioner, or the receiver or conservator of an
38	44		impaired title insurance company or agent.
39	45		SECTION 4. Section 2602.101(a), Insurance Code, is amended
40	46		to read as follows:
41	47		(a) In addition to the other powers and duties provided by
42	48		this chapter, the association may:
43	49		(1) borrow money as necessary to implement this
44	50		chapter according to the plan of operation;
45	51		(2) lend money to the receiver, supervisor, or
46	52		conservator of an impaired title insurance company or its agent;
47	53		(3) sue and be sued, including taking any legal action
48	54		necessary or proper to recover an unpaid assessment;
49	55		(4) enter into contracts as necessary or proper to
50	56		implement this chapter;
51	57		(5) ensure payment of the policy obligations of an
52	58		impaired title insurance company;
53	59		(6) negotiate and contract with a rehabilitator,
54	60		conservator, supervisor, receiver, [or] ancillary receiver, or
55	61		other third party to exercise the powers and perform the duties of
56	62		the association;
57	63		(7) guarantee, assume, or reinsure, or cause to be
58	64		guaranteed, assumed, or reinsured, a policy or contract of an
59	65		impaired title insurance company;
60	66		(8) take legal action necessary to avoid the payment
61	67		of improper claims or to settle claims or potential claims against
62	68		an impaired title insurance company or agent, or the association;
63	69		(9) assume control of and consolidate the escrow
64	70		accounts transferred to the association by an impaired agent that
65	71		has been placed in receivership, supervision, or conservatorship,
66	72		and:
67	73		(A) pay covered claims from the consolidated
68	74		escrow accounts to facilitate processing and payment of claims;
69	75		(B) maintain a separate accounting for each
70	76		transferred escrow account; and
71	77		(C) return money not used to pay a covered claim
72	78		to the owner of the money in accordance with the contract governing
73	79		the escrow of the money; and
74	80		(10) [(9)] perform any other acts as necessary or
75	81		proper to implement this chapter.
76	82		SECTION 5. Sections 2602.102(a) and (b), Insurance Code,
77	83		are amended to read as follows:
78	84		(a) The association shall perform its functions under a plan
79	85		of operation. The plan of operation must contain provisions
80	86		necessary or proper for the execution of the association's powers
81	87		and duties. The plan of operation must, in addition to the other
82	88		requirements of this chapter:
83	89		(1) establish:
84	90		(A) procedures for handling the assets of the
85	91		association;
86	92		(B) the amount and method of reimbursing board
87	93		members;
88	94		(C) regular places and times for board meetings;
89	95		(D) procedures for maintaining records of all
90	96		financial transactions of the association, its agents, and the
91	97		board; and
92	98		(E) procedures for determining the amount of
93	99		guaranty fees, for collecting those fees, and for assessments;
94	100		(2) provide for the establishment of a claims filing
95	101		procedure that includes:
96	102		(A) notice by the association to claimants;
97	103		(B) procedures for filing claims seeking
98	104		recovery from the association; and
99	105		(C) a procedure for appealing the denial of
100	106		claims by the association; and
101	107		(3) [(2)] contain additional provisions necessary or
102	108		proper for the execution of the association's powers and duties.
103	109		(b) The association shall submit to the commissioner any
104	110		amendment to the plan of operation necessary or suitable to ensure
105	111		the fair, reasonable, and equitable administration of the
106	112		association. The amendment takes effect on the commissioner's
107	113		written approval or the 90th day after the date the amendment is
108	114		submitted unless disapproved by the commissioner.
109	115		SECTION 6. Sections 2602.103(b) and (c), Insurance Code,
110	116		are amended to read as follows:
111	117		(b) On the commissioner's approval [request], the
112	118		association shall reimburse the department out of the guaranty fee
113	119		account for the cost, including reasonable and necessary expenses,
114	120		to employ or retain one or more persons to:
115	121		(1) audit and review agent escrow and trust accounts,
116	122		financial condition, and compliance with applicable statutes and
117	123		rules; [and]
118	124		(2) report to the commissioner on the accounts,
119	125		condition, and compliance; or
120	126		(3) supervise a person employed or retained to perform
121	127		audit and review under Subdivision (1).
122	128		(c) A person employed or retained under Subsection (b) acts
123	129		solely under the direction of and as assigned by the commissioner
124	130		but shall report the person's activity and expenses to the
125	131		association on the request of the association.
126	132		SECTION 7. Section 2602.104(a), Insurance Code, is amended
127	133		to read as follows:
128	134		(a) The association shall maintain a record of its [each
129	135		negotiation or meeting in which the association or the
130	136		association's representative discusses the association's]
131	137		activities in exercising its powers and performing its duties under
132	138		this chapter.
133	139		SECTION 8. Section 2602.105, Insurance Code, is amended to
134	140		read as follows:
135	141		Sec. 2602.105. MEETING BY CONFERENCE CALL. Notwithstanding
136	142		Chapter 551, Government Code, the board may hold an open meeting by
137	143		telephone conference call if immediate action is required and
138	144		convening of a quorum of the board at a single location is not
139	145		reasonable or practical. The meeting is subject to the notice
140	146		requirements that apply to other meetings. The notice of the
141	147		meeting must specify as the location of the meeting the location at
142	148		which meetings of the board are usually held. Each[, and each] part
143	149		of the meeting that is required to be open to the public must be
144	150		audible to the public at that location and must be recorded. The
145	151		audio [tape-recorded. The tape] recording shall be retained and
146	152		made available to the public for 30 days after the meeting date.
147	153		SECTION 9. Section 2602.107, Insurance Code, is amended by
148	154		amending Subsection (b) and adding Subsection (e) to read as
149	155		follows:
150	156		(b) The association may transfer income from investment of
151	157		the association's money in any account to the administrative
152	158		account.
153	159		(e) The association may advance money from any account to
154	160		the administrative account to pay the administrative expenses of
155	161		the association.
156	162		SECTION 10. Section 2602.109(a), Insurance Code, is amended
157	163		to read as follows:
158	164		(a) The [If the] association shall reserve in the title
159	165		account the amount of money the association determines [that money
160	166		in the title account exceeds the amount] reasonably necessary for
161	167		efficient future administration [operation] under this chapter.
162	168		The[, the] association shall return the excess money pro rata to
163	169		the holders of participation receipts on which an outstanding
164	170		balance exists after deducting any credits against premium taxes
165	171		taken under Section 2602.210. The amount deducted for those credits
166	172		shall be deposited with the comptroller for credit to the general
167	173		revenue fund. The association shall transfer to the guaranty fee
168	174		account any excess money remaining in the title account after the
169	175		distribution and reservation of money for administration.
170	176		SECTION 11. Section 2602.110, Insurance Code, is amended to
171	177		read as follows:
172	178		Sec. 2602.110. EXPENSES OF ADMINISTERING IMPAIRED INSURER
173	179		OR IMPAIRED AGENT. (a) The association may spend or advance money
174	180		necessary to pay the expenses of administering the supervision,
175	181		rehabilitation, receivership, conservatorship, or, as determined
176	182		by a court of competent jurisdiction, other insolvency of an
177	183		impaired title insurance company or impaired agent, on terms the
178	184		association negotiates, if the company's or agent's assets are
179	185		insufficient to pay those expenses.
180	186		(b) The association may file a claim in a receivership
181	187		proceeding against an impaired title insurance company or impaired
182	188		agent to recover the association's reasonable costs incurred in
183	189		exercising the association's powers or performing the association's
184	190		duties under this chapter with respect to the impaired title
185	191		insurance company or impaired agent. Payment of a claim asserted by
186	192		the association under this section in a receivership proceeding in
187	193		this state is governed by Section 443.301. Payment of a claim
188	194		asserted by the association under this section in a receivership
189	195		proceeding in another state is governed by the law governing
190	196		priority of payment of distributions on unsecured claims by an
191	197		insurance guaranty association in that state.
192	198		SECTION 12. Section 2602.111(a), Insurance Code, is amended
193	199		to read as follows:
194	200		(a) The plan of operation may provide that, on approval of
195	201		the board [and the commissioner], a power or duty of the association
196	202		may be delegated to a corporation or other organization that:
197	203		(1) performs or will perform in two or more states
198	204		functions similar to those of the association or its equivalent;
199	205		and
200	206		(2) provides protection not substantially less
201	207		favorable and effective than that provided by this chapter.
202	208		SECTION 13. Section 2602.114(b), Insurance Code, is amended
203	209		to read as follows:
204	210		(b) The meeting is not open to the public. Only board
205	211		members, association counsel and other association
206	212		representatives, the commissioner, and persons the commissioner
207	213		authorizes may attend the meeting.
208	214		SECTION 14. Section 2602.116, Insurance Code, is amended to
209	215		read as follows:
210	216		Sec. 2602.116. BOARD ACCESS TO RECORDS. The receiver,
211	217		supervisor, conservator, or other statutory successor of an
212	218		impaired title insurance company or agent shall give the board or
213	219		its representative:
214	220		(1) access to the company's or agent's records as
215	221		necessary for the board to perform its functions under this chapter
216	222		relating to covered claims; and
217	223		(2) copies of those records on the board's request and
218	224		at the board's expense.
219	225		SECTION 15. Section 2602.153, Insurance Code, is amended by
220	226		amending Subsection (a) and adding Subsection (e) to read as
221	227		follows:
222	228		(a) The association shall collect, receive, retain, [and]
223	229		disburse, and advance the guaranty fees only as specifically
224	230		provided by this chapter.
225	231		(e) The association may advance money from the guaranty fee
226	232		account as the association considers necessary to provide for the
227	233		payment of covered claims related to an impaired agent and
228	234		administrative expenses related to the evaluation and payment of
229	235		those claims. The advanced money shall be repaid to the guaranty
230	236		fee account as soon as is practicable with money from guaranty fees
231	237		or the estate of the impaired agent. No interest may accrue on the
232	238		advanced money.
233	239		SECTION 16. Section 2602.201(a), Insurance Code, is amended
234	240		to read as follows:
235	241		(a) If the commissioner determines that a title insurance
236	242		company [or agent] has become impaired, the association shall
237	243		promptly estimate the amount of additional money needed to
238	244		supplement the assets of the impaired title insurance company [or
239	245		agent] to pay all covered claims and administrative expenses,
240	246		including expenses related to processing and payment of the claims.
241	247		SECTION 17. Section 2602.202(b), Insurance Code, is amended
242	248		to read as follows:
243	249		(b) The assessment of each title insurance company must be
244	250		in the proportion that the net direct written premiums of that
245	251		company in this state for the calendar year preceding the
246	252		assessment bear to the net direct written premiums of all title
247	253		insurance companies for that year. Assessments and supplemental
248	254		assessments may be made in consecutive years until the association
249	255		has collected an amount sufficient to pay the obligations and
250	256		expenses described under Subsection (a). The association may make
251	257		a supplemental assessment only against the same title insurance
252	258		companies and in the same proportion for each company as the initial
253	259		assessment.
254	260		SECTION 18. Section 2602.203, Insurance Code, is amended to
255	261		read as follows:
256	262		Sec. 2602.203. NOTICE AND PAYMENT. The [(a) Not later than
257	263		the 30th day before the date an assessment is due, the] association
258	264		shall give each [notify the] title insurance company to be assessed
259	265		at least 90 days' written notice of the due date of the assessment
260	266		[company].
261	267		[(b) Not later than the 30th day after the date an
262	268		assessment is made, the title insurance company shall pay the
263	269		association the amount of the assessment.]
264	270		SECTION 19. Section 2602.206(b), Insurance Code, is amended
265	271		to read as follows:
266	272		(b) The holder of the receipt is a general creditor of the
267	273		impaired title insurance company, except that if the amount of
268	274		assessments the association receives exceeds the amount paid for
269	275		covered claims and administrative expenses, the holders of
270	276		participation receipts have preference over other general
271	277		creditors to, and are entitled to share pro rata in, the excess.
272	278		SECTION 20. Section 2602.208(a), Insurance Code, is amended
273	279		to read as follows:
274	280		(a) Money from assessments is considered to supplement the
275	281		marshalling of an impaired title insurance company's assets to make
276	282		payments of covered claims on the impaired title insurance
277	283		company's behalf and to pay administrative expenses related to
278	284		payment of covered claims. The association may assess title
279	285		insurance companies or use money from assessments to pay covered
280	286		claims before the receiver exhausts the impaired title insurance
281	287		company's assets.
282	288		SECTION 21. Section 2602.210, Insurance Code, is amended by
283	289		amending Subsection (a) and adding Subsection (d) to read as
284	290		follows:
285	291		(a) A title insurance company is entitled to recover in its
286	292		rates for the succeeding 12 months [calendar year] amounts paid in
287	293		assessments not to exceed one percent of the company's net direct
288	294		written premiums. In promulgating or establishing rates the
289	295		commissioner shall consider assessments and refunds of assessments
290	296		and shall adjust the rates to allow for recovery under this
291	297		subsection.
292	298		(d) If the association receives money related to a title
293	299		insurance company receivership from any source, including payment
294	300		of a claim made by the association against the estate of the title
295	301		insurance company, that is in excess of the amount title insurance
296	302		companies have recovered or are entitled to recover under this
297	303		section, the excess money shall be held by the association in its
298	304		title account to offset the amounts required for future assessments
299	305		or administrative expenses of the association.
300	306		SECTION 22. Section 2602.251, Insurance Code, is amended to
301	307		read as follows:
302	308		Sec. 2602.251. COVERED CLAIMS IN GENERAL. An unpaid claim
303	309		is a covered claim if:
304	310		(1) the claim is made by an insured under a title
305	311		insurance policy to which this chapter applies;
306	312		(2) the claim arises out of the policy and is within
307	313		the coverage and applicable limits of the policy, subject to all
308	314		applicable policy provisions and defenses available under the
309	315		policy and applicable law;
310	316		(3) the title insurance company that issued the policy
311	317		or assumed the policy under an assumption certificate is an
312	318		impaired title insurance company; and
313	319		(4) the insured real property or a lien on the property
314	320		is located in this state.
315	321		SECTION 23. Section 2602.252, Insurance Code, is amended to
316	322		read as follows:
317	323		Sec. 2602.252. CLAIM AGAINST TRUST FUNDS OR ESCROW ACCOUNT.
318	324		An unpaid claim is a covered claim if the claim:
319	325		(1) is:
320	326		(A) against trust funds or an escrow account of
321	327		an impaired title insurance company or agent; or
322	328		(B) for money received by an impaired title
323	329		insurance company, the company's agent, or an authorized agent of
324	330		the company's agent for deposit into a trust fund or an escrow
325	331		account; and
326	332		(2) is unpaid because of a shortage of those funds or
327	333		in that account, including a shortage that exists because the money
328	334		was not deposited by the impaired title insurance company or the
329	335		company's agent in the fund or account.
330	336		SECTION 24. Section 2602.255, Insurance Code, is amended to
331	337		read as follows:
332	338		Sec. 2602.255. CLAIMS NOT COVERED. The following are not
333	339		covered claims:
334	340		(1) an amount due a reinsurer, title insurance
335	341		company, insurance pool, or underwriting association as a
336	342		subrogation recovery or otherwise;
337	343		(2) a supplementary payment obligation incurred
338	344		before a determination is made under this chapter that a title
339	345		insurance company or agent is impaired, including:
340	346		(A) adjustment fees or expenses;
341	347		(B) attorney's fees or expenses;
342	348		(C) court costs;
343	349		(D) interest;
344	350		(E) enhanced damages, sought as a recovery
345	351		against the insured, the impaired title insurance company or agent,
346	352		or the association, that arise under Chapter 541 of this code or
347	353		Subchapter E, Chapter 17, Business & Commerce Code, or a similar law
348	354		of another state; and
349	355		(F) bond premiums;
350	356		(3) a shortage of trust funds or in an escrow account
351	357		resulting from the insolvency of a financial institution;
352	358		(4) exemplary, extracontractual, or bad faith damages
353	359		awarded against an insured or title insurance company by a court
354	360		judgment;
355	361		(5) a claim under Section 2602.252 by a claimant who
356	362		has a lien against the real property that was the subject of the
357	363		transaction from which the claim arises, unless the lien is held to
358	364		be invalid as a matter of law;
359	365		(6) a claim under Section 2602.251, 2602.252, or
360	366		2602.253 by a claimant who caused or substantially contributed to
361	367		the claimant's loss by the claimant's action or omission, as
362	368		determined by the association or the association's agent; and
363	369		(7) a claim filed with the association after the claim
364	370		filing deadline for [final date set by the court for the filing of
365	371		claims against a receiver of] an impaired title insurance company
366	372		or agent.
367	373		SECTION 25. Section 2602.256, Insurance Code, is amended to
368	374		read as follows:
369	375		Sec. 2602.256. AMOUNT OF COVERED CLAIM; LIMIT. (a) A
370	376		covered claim under Section 2602.251 or 2602.253 may not exceed the
371	377		lesser of $500,000 [$250,000] for each claimant or $500,000
372	378		[$250,000] for each policy.
373	379		(b) A covered claim under Section 2602.252 may not exceed
374	380		the lesser of $500,000 [$250,000] for each claimant or the amount of
375	381		money actually received by [delivered to] the impaired title
376	382		insurance company or agent as trust funds or an escrow account for
377	383		each claimant in a transaction from which the claim arises, except
378	384		that the cumulative amount of covered claims arising from a single
379	385		transaction may not exceed $500,000 [$250,000].
380	386		SECTION 26. Section 2602.259(c), Insurance Code, is amended
381	387		to read as follows:
382	388		(c) In a proceeding considering a covered claim, a judgment
383	389		against an insured taken after the date the delinquency proceeding
384	390		or supervision begins or a conservator is appointed is not evidence
385	391		of liability or of the amount of damages, and a default or consent
386	392		judgment against an insured or the impaired title insurance company
387	393		or a settlement, release, or judgment entered into by the insured or
388	394		the impaired title insurance company does not bind the association
389	395		and is not evidence of liability or of the amount of damages in
390	396		connection with a claim brought against the association or another
391	397		party under this chapter.
392	398		SECTION 27. Section 2602.260, Insurance Code, is amended to
393	399		read as follows:
394	400		Sec. 2602.260. ADMISSIBILITY OF PAYMENT. In a lawsuit
395	401		brought by a conservator, supervisor, or receiver of an impaired
396	402		title insurance company or agent to recover assets of the company or
397	403		agent, the fact that a claim against the company or agent has been
398	404		or will be paid under this chapter is not admissible and may not be
399	405		placed before a jury by evidence, argument, or reference.
400	406		SECTION 28. Subchapter F, Chapter 2602, Insurance Code, is
401	407		amended by adding Section 2602.261 to read as follows:
402	408		Sec. 2602.261. APPEAL OF CLAIM DETERMINATION. A claimant's
403	409		right of appeal with respect to a claim determination by the
404	410		association is governed by the association's plan of operation. A
405	411		claimant must bring an action, including an action for declaratory
406	412		relief, challenging denial of a claim not later than one year after
407	413		the date the claim was denied.
408	414		SECTION 29. Section 2602.302, Insurance Code, is amended by
409	415		amending Subsections (a) and (b) and adding Subsections (b-1) and
410	416		(f) to read as follows:
411	417		(a) The association shall pay covered claims:
412	418		(1) existing before the determination of impairment;
413	419		or
414	420		(2) arising on or before:
415	421		(A) the date of cancellation of the impaired
416	422		title insurance company's policies or the claim deadline for claims
417	423		against the impaired title insurance company, as applicable; or
418	424		(B) the claim deadline for covered claims against
419	425		an impaired agent, which is the first anniversary of the date of
420	426		determination of impairment.
421	427		(b) A [The] court in this state in which [the] receivership
422	428		proceedings of an impaired title insurance company are pending
423	429		shall set, as applicable:
424	430		(1) the date of cancellation of the policies, which
425	431		may not be later than the fifth anniversary of the date of
426	432		determination of impairment; or
427	433		(2) the claim deadline, which may not be later than the
428	434		first anniversary of the date of determination of impairment.
429	435		(b-1) If an impaired title insurance company is in
430	436		receivership proceedings outside of this state, the claim deadline
431	437		is the first anniversary of the date of determination of
432	438		impairment.
433	439		(f) On payment of the last timely filed covered claim, the
434	440		association is discharged from the association's obligations under
435	441		this chapter. This subsection does not discharge the association
436	442		of obligations related to pending litigation.
437	443		SECTION 30. Section 2602.452(b), Insurance Code, is amended
438	444		to read as follows:
439	445		(b) The association may employ or retain a person or persons
440	446		to perform any action required under Subsection (a), in accordance
441	447		with Section 2602.103(a).
442	448		SECTION 31. Section 2602.103(d), Insurance Code, is
443	449		repealed.
444	450		SECTION 32. (a) Except as provided by this section, the
445	451		changes in law made by this Act apply only with respect to a title
446	452		insurance company or agent that is designated as impaired on or
447	453		after the effective date of this Act. The law as it existed
448	454		immediately before the effective date of this Act applies with
449	455		respect to a title insurance company or agent that was designated as
450	456		impaired before the effective date of this Act, and that law is
451	457		continued in effect for that purpose.
452	458		(b) Section 2602.013, Insurance Code, as added by this Act,
453	459		and Section 2602.260, Insurance Code, as amended by this Act, apply
454	460		only to an action commenced on or after the effective date of this
455	461		Act. An action commenced before the effective date of this Act is
456	462		governed by the law applicable to the action immediately before the
457	463		effective date of this Act, and that law is continued in effect for
458	464		that purpose.
459	465		SECTION 33. This Act takes effect September 1, 2019.
460		-	______________________________ ______________________________
461		-	President of the Senate Speaker of the House
462		-	I certify that H.B. No. 1614 was passed by the House on May 3,
463		-	2019, by the following vote: Yeas 138, Nays 2, 2 present, not
464		-	voting.
465		-	______________________________
466		-	Chief Clerk of the House
467		-	I certify that H.B. No. 1614 was passed by the Senate on May
468		-	22, 2019, by the following vote: Yeas 31, Nays 0.
469		-	______________________________
470		-	Secretary of the Senate
471		-	APPROVED: _____________________
472		-	Date
473		-	_____________________
474		-	Governor
	466	+	* * * * *