By: Creighton S.B. No. 2333
(In the Senate - Filed March 8, 2019; March 21, 2019, read
first time and referred to Committee on Business & Commerce;
May 6, 2019, reported adversely, with favorable Committee
Substitute by the following vote: Yeas 8, Nays 0; May 6, 2019, sent
to printer.)
COMMITTEE SUBSTITUTE FOR S.B. No. 2333 By: Creighton
A BILL TO BE ENTITLED
AN ACT
relating to the operation of the Texas Title Insurance Guaranty
Association.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 2602.008(a), 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 or the commissioner's
representative;
(2) the association or the association's agent,
representative, 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 2. Subchapter A, Chapter 2602, Insurance Code, is
amended by adding Section 2602.013 to read as follows:
Sec. 2602.013. VENUE. An action against the association or
an action against the association's board member, agent,
representative, or employee that arises from the exercise of the
person's powers or performance of the person's duties under this
chapter must be brought in a district court in Travis County.
SECTION 3. Section 2602.057(a), Insurance Code, is amended
to read as follows:
(a) A title insurance company is not prohibited, because the
company has an officer, director, or employee serving as a board
member, from negotiating for or entering into a contract of
reinsurance or assumption of liability or a contract of
substitution to provide for liabilities for covered claims with the
association, the commissioner, or the receiver or conservator of an
impaired title insurance company or agent.
SECTION 4. Section 2602.101(a), Insurance Code, is amended
to read as follows:
(a) In addition to the other powers and duties provided by
this chapter, the association may:
(1) borrow money as necessary to implement this
chapter according to the plan of operation;
(2) lend money to the receiver, supervisor, or
conservator of an impaired title insurance company or its agent;
(3) sue and be sued, including taking any legal action
necessary or proper to recover an unpaid assessment;
(4) enter into contracts as necessary or proper to
implement this chapter;
(5) ensure payment of the policy obligations of an
impaired title insurance company;
(6) negotiate and contract with a rehabilitator,
conservator, supervisor, receiver, [or] ancillary receiver, or
other third party to exercise the powers and perform the duties of
the association;
(7) guarantee, assume, or reinsure, or cause to be
guaranteed, assumed, or reinsured, a policy or contract of an
impaired title insurance company;
(8) take legal action necessary to avoid the payment
of improper claims or to settle claims or potential claims against
an impaired title insurance company or agent, or the association;
(9) assume control of and consolidate the escrow
accounts transferred to the association by an impaired agent that
has been placed in receivership, supervision, or conservatorship,
and:
(A) pay covered claims from the consolidated
escrow accounts to facilitate processing and payment of claims;
(B) maintain a separate accounting for each
transferred escrow account; and
(C) return money not used to pay a covered claim
to the owner of the money in accordance with the contract governing
the escrow of the money; and
(10) [(9)] perform any other acts as necessary or
proper to implement this chapter.
SECTION 5. Sections 2602.102(a) and (b), Insurance Code,
are amended to read as follows:
(a) The association shall perform its functions under a plan
of operation. The plan of operation must contain provisions
necessary or proper for the execution of the association's powers
and duties. The plan of operation must, in addition to the other
requirements of this chapter:
(1) establish:
(A) procedures for handling the assets of the
association;
(B) the amount and method of reimbursing board
members;
(C) regular places and times for board meetings;
(D) procedures for maintaining records of all
financial transactions of the association, its agents, and the
board; and
(E) procedures for determining the amount of
guaranty fees, for collecting those fees, and for assessments;
(2) provide for the establishment of a claims filing
procedure that includes:
(A) notice by the association to claimants;
(B) procedures for filing claims seeking
recovery from the association; and
(C) a procedure for appealing the denial of
claims by the association; and
(3) [(2)] contain additional provisions necessary or
proper for the execution of the association's powers and duties.
(b) The association shall submit to the commissioner any
amendment to the plan of operation necessary or suitable to ensure
the fair, reasonable, and equitable administration of the
association. The amendment takes effect on the commissioner's
written approval or the 90th day after the date the amendment is
submitted unless disapproved by the commissioner.
SECTION 6. Sections 2602.103(b) and (c), Insurance Code,
are amended to read as follows:
(b) On the commissioner's approval [request], the
association shall reimburse the department out of the guaranty fee
account for the cost, including reasonable and necessary expenses,
to employ or 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 on the accounts,
condition, and compliance; or
(3) supervise a person employed or retained to perform
audit and review under Subdivision (1).
(c) A person employed or retained under Subsection (b) acts
solely under the direction of and as assigned by the commissioner
but shall report the person's activity and expenses to the
association on the request of the association.
SECTION 7. Section 2602.104(a), Insurance Code, is amended
to read as follows:
(a) The association shall maintain a record of its [each
negotiation or meeting in which the association or the
association's representative discusses the association's]
activities in exercising its powers and performing its duties under
this chapter.
SECTION 8. Section 2602.105, Insurance Code, is amended to
read as follows:
Sec. 2602.105. MEETING BY CONFERENCE CALL. Notwithstanding
Chapter 551, Government Code, the board may hold an open meeting by
telephone conference call if immediate action is required and
convening of a quorum of the board at a single location is not
reasonable or practical. The meeting is subject to the notice
requirements that apply to other meetings. The notice of the
meeting must specify as the location of the meeting the location at
which meetings of the board are usually held. Each[, and each] part
of the meeting that is required to be open to the public must be
audible to the public at that location and must be recorded. The
audio [tape-recorded. The tape] recording shall be retained and
made available to the public for 30 days after the meeting date.
SECTION 9. Section 2602.107, Insurance Code, is amended by
amending Subsection (b) and adding Subsection (e) to read as
follows:
(b) The association may transfer income from investment of
the association's money in any account to the administrative
account.
(e) The association may advance money from any account to
the administrative account to pay the administrative expenses of
the association.
SECTION 10. Section 2602.109(a), Insurance Code, is amended
to read as follows:
(a) The [If the] association shall reserve in the title
account the amount of money the association determines [that money
in the title account exceeds the amount] reasonably necessary for
efficient future administration [operation] under this chapter.
The[, the] association shall return the excess money pro rata to the
holders of participation receipts on which an outstanding balance
exists after deducting any credits against premium taxes taken
under Section 2602.210. The amount deducted for those credits
shall be deposited with the comptroller for credit to the general
revenue fund. The association shall transfer to the guaranty fee
account any excess money remaining in the title account after the
distribution and reservation of money for administration.
SECTION 11. Section 2602.110, Insurance Code, is amended to
read as follows:
Sec. 2602.110. EXPENSES OF ADMINISTERING IMPAIRED INSURER
OR IMPAIRED AGENT. (a) The association may spend or advance money
necessary to pay the expenses of administering the supervision,
rehabilitation, receivership, conservatorship, or, as determined
by a court of competent jurisdiction, other insolvency of an
impaired title insurance company or impaired agent, on terms the
association negotiates, if the company's or agent's assets are
insufficient to pay those expenses.
(b) The association may file a claim in a receivership
proceeding against an impaired title insurance company or impaired
agent to recover the association's reasonable costs incurred in
exercising the association's powers or performing the association's
duties under this chapter with respect to the impaired title
insurance company or impaired agent. Payment of a claim asserted by
the association under this section in a receivership proceeding in
this state is governed by Section 443.301. Payment of a claim
asserted by the association under this section in a receivership
proceeding in another state is governed by the law governing
priority of payment of distributions on unsecured claims by an
insurance guaranty association in that state.
SECTION 12. Section 2602.111(a), Insurance Code, is amended
to read as follows:
(a) The plan of operation may provide that, on approval of
the board [and the commissioner], 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 13. Section 2602.114(b), Insurance Code, is amended
to read as follows:
(b) The meeting is not open to the public. Only board
members, association counsel and other association
representatives, the commissioner, and persons the commissioner
authorizes may attend the meeting.
SECTION 14. Section 2602.116, Insurance Code, is amended to
read as follows:
Sec. 2602.116. BOARD ACCESS TO RECORDS. The receiver,
supervisor, conservator, or other statutory successor of an
impaired title insurance company or agent shall give the board or
its representative:
(1) access to the company's or agent's records as
necessary for the board to perform its functions under this chapter
relating to covered claims; and
(2) copies of those records on the board's request and
at the board's expense.
SECTION 15. Section 2602.153, Insurance Code, is amended by
amending Subsection (a) and adding Subsection (e) to read as
follows:
(a) The association shall collect, receive, retain, [and]
disburse, and advance the guaranty fees only as specifically
provided by this chapter.
(e) The association may advance money from the guaranty fee
account as the association considers necessary to provide for the
payment of covered claims related to an impaired agent and
administrative expenses related to the evaluation and payment of
those claims. The advanced money shall be repaid to the guaranty
fee account as soon as is practicable with money from guaranty fees
or the estate of the impaired agent. No interest may accrue on the
advanced money.
SECTION 16. Section 2602.201(a), Insurance Code, is amended
to read as follows:
(a) If the commissioner 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,
including expenses related to processing and payment of the claims.
SECTION 17. Section 2602.202(b), Insurance Code, is amended
to read as follows:
(b) The assessment of each title insurance company must be
in the proportion that the net direct written premiums of that
company in this state for the calendar year preceding the
assessment bear to the net direct written premiums of all title
insurance companies for that year. Assessments and supplemental
assessments may be made in consecutive years until the association
has collected an amount sufficient to pay the obligations and
expenses described under Subsection (a). The association may make
a supplemental assessment only against the same title insurance
companies and in the same proportion for each company as the initial
assessment.
SECTION 18. Section 2602.203, Insurance Code, is amended to
read as follows:
Sec. 2602.203. NOTICE AND PAYMENT. The [(a) Not later
than the 30th day before the date an assessment is due, the]
association shall give each [notify the] title insurance company to
be assessed at least 90 days' written notice of the due date of the
assessment [company].
[(b) Not later than the 30th day after the date an
assessment is made, the title insurance company shall pay the
association the amount of the assessment.]
SECTION 19. Section 2602.206(b), Insurance Code, is amended
to read as follows:
(b) The holder of the receipt is a general creditor of the
impaired title insurance company, except that if the amount of
assessments the association receives exceeds the amount paid for
covered claims and administrative expenses, the holders of
participation receipts have preference over other general
creditors to, and are entitled to share pro rata in, the excess.
SECTION 20. Section 2602.208(a), Insurance Code, is amended
to read as follows:
(a) Money from assessments is considered to supplement the
marshalling of an impaired title insurance company's assets to make
payments of covered claims on the impaired title insurance
company's behalf and to pay administrative expenses related to
payment of covered claims. The association may assess title
insurance companies or use money from assessments to pay covered
claims before the receiver exhausts the impaired title insurance
company's assets.
SECTION 21. Section 2602.210, Insurance Code, is amended by
amending Subsection (a) and adding Subsection (d) to read as
follows:
(a) A title insurance company is entitled to recover in its
rates for the succeeding 12 months [calendar year] amounts paid in
assessments not to exceed one percent of the company's net direct
written premiums. In promulgating or establishing rates the
commissioner shall consider assessments and refunds of assessments
and shall adjust the rates to allow for recovery under this
subsection.
(d) If the association receives money related to a title
insurance company receivership from any source, including payment
of a claim made by the association against the estate of the title
insurance company, that is in excess of the amount title insurance
companies have recovered or are entitled to recover under this
section, the excess money shall be held by the association in its
title account to offset the amounts required for future assessments
or administrative expenses of the association.
SECTION 22. Section 2602.251, Insurance Code, is amended to
read as follows:
Sec. 2602.251. COVERED CLAIMS IN GENERAL. An unpaid claim
is a covered claim if:
(1) the claim is made by an insured under a title
insurance policy to which this chapter applies;
(2) the claim arises out of the policy and is within
the coverage and applicable limits of the policy, subject to all
applicable policy provisions and defenses available under the
policy and applicable law;
(3) the title insurance company that issued the policy
or assumed the policy under an assumption certificate is an
impaired title insurance company; and
(4) the insured real property or a lien on the property
is located in this state.
SECTION 23. Section 2602.252, Insurance Code, is amended to
read as follows:
Sec. 2602.252. CLAIM AGAINST TRUST FUNDS OR ESCROW ACCOUNT.
An unpaid claim is a covered claim if the claim:
(1) is:
(A) against trust funds or an escrow account of
an impaired title insurance company or agent; or
(B) for money received by an impaired title
insurance company, the company's agent, or an authorized agent of
the company's agent for deposit into a trust fund or an escrow
account; and
(2) is unpaid because of a shortage of those funds or
in that account, including a shortage that exists because the money
was not deposited by the impaired title insurance company or the
company's agent in the fund or account.
SECTION 24. Section 2602.255, Insurance Code, is amended to
read as follows:
Sec. 2602.255. CLAIMS NOT COVERED. The following are not
covered claims:
(1) an amount due a reinsurer, title insurance
company, insurance pool, or underwriting association as a
subrogation recovery or otherwise;
(2) a supplementary payment obligation incurred
before a determination is made under this chapter that a title
insurance company or agent is impaired, including:
(A) adjustment fees or expenses;
(B) attorney's fees or expenses;
(C) court costs;
(D) interest;
(E) enhanced damages, sought as a recovery
against the insured, the impaired title insurance company or agent,
or the association, that arise under Chapter 541 of this code or
Subchapter E, Chapter 17, Business & Commerce Code, or a similar law
of another state; and
(F) bond premiums;
(3) a shortage of trust funds or in an escrow account
resulting from the insolvency of a financial institution;
(4) exemplary, extracontractual, or bad faith damages
awarded against an insured or title insurance company by a court
judgment;
(5) a claim under Section 2602.252 by a claimant who
has a lien against the real property that was the subject of the
transaction from which the claim arises, unless the lien is held to
be invalid as a matter of law;
(6) a claim under Section 2602.251, 2602.252, or
2602.253 by a claimant who caused or substantially contributed to
the claimant's loss by the claimant's action or omission, as
determined by the association or the association's agent; and
(7) a claim filed with the association after the claim
filing deadline for [final date set by the court for the filing of
claims against a receiver of] an impaired title insurance company
or agent.
SECTION 25. Section 2602.256, Insurance Code, is amended to
read as follows:
Sec. 2602.256. AMOUNT OF COVERED CLAIM; LIMIT. (a) A
covered claim under Section 2602.251 or 2602.253 may not exceed the
lesser of $500,000 [$250,000] for each claimant or $500,000
[$250,000] for each policy.
(b) A covered claim under Section 2602.252 may not exceed
the lesser of $500,000 [$250,000] for each claimant or the amount of
money actually received by [delivered to] the impaired title
insurance company or agent as trust funds or an escrow account for
each claimant in a transaction from which the claim arises, except
that the cumulative amount of covered claims arising from a single
transaction may not exceed $500,000 [$250,000].
SECTION 26. Section 2602.259(c), Insurance Code, is amended
to read as follows:
(c) In a proceeding considering a covered claim, a judgment
against an insured taken after the date the delinquency proceeding
or supervision begins or a conservator is appointed is not evidence
of liability or of the amount of damages, and a default or consent
judgment against an insured or the impaired title insurance company
or a settlement, release, or judgment entered into by the insured or
the impaired title insurance company does not bind the association
and is not evidence of liability or of the amount of damages in
connection with a claim brought against the association or another
party under this chapter.
SECTION 27. Section 2602.260, Insurance Code, is amended to
read as follows:
Sec. 2602.260. ADMISSIBILITY OF PAYMENT. In a lawsuit
brought by a conservator, supervisor, or receiver of an impaired
title insurance company or agent to recover assets of the company or
agent, the fact that a claim against the company or agent has been
or will be paid under this chapter is not admissible and may not be
placed before a jury by evidence, argument, or reference.
SECTION 28. Subchapter F, Chapter 2602, Insurance Code, is
amended by adding Section 2602.261 to read as follows:
Sec. 2602.261. APPEAL OF CLAIM DETERMINATION. A claimant's
right of appeal with respect to a claim determination by the
association is governed by the association's plan of operation. A
claimant must bring an action, including an action for declaratory
relief, challenging denial of a claim not later than one year after
the date the claim was denied.
SECTION 29. Section 2602.302, Insurance Code, is amended by
amending Subsections (a) and (b) and adding Subsections (b-1) and
(f) to read as follows:
(a) The association shall pay covered claims:
(1) existing before the determination of impairment;
or
(2) arising on or before:
(A) the date of cancellation of the impaired
title insurance company's policies or the claim deadline for claims
against the impaired title insurance company, as applicable; or
(B) the claim deadline for covered claims against
an impaired agent, which is the first anniversary of the date of
determination of impairment.
(b) A [The] court in this state in which [the] receivership
proceedings of an impaired title insurance company are pending
shall set, as applicable:
(1) the date of cancellation of the policies, which
may not be later than the fifth anniversary of the date of
determination of impairment; or
(2) the claim deadline, which may not be later than the
first anniversary of the date of determination of impairment.
(b-1) If an impaired title insurance company is in
receivership proceedings outside of this state, the claim deadline
is the first anniversary of the date of determination of
impairment.
(f) On payment of the last timely filed covered claim, the
association is discharged from the association's obligations under
this chapter. This subsection does not discharge the association
of obligations related to pending litigation.
SECTION 30. Section 2602.452(b), Insurance Code, is amended
to read as follows:
(b) The association may employ or retain a person or persons
to perform any action required under Subsection (a), in accordance
with Section 2602.103(a).
SECTION 31. Section 2602.103(d), Insurance Code, is
repealed.
SECTION 32. (a) Except as provided by this section, the
changes in law made by this Act apply only with respect to a title
insurance company or agent that is designated as impaired on or
after the effective date of this Act. The law as it existed
immediately before the effective date of this Act applies with
respect to a title insurance company or agent that was designated as
impaired before the effective date of this Act, and that law is
continued in effect for that purpose.
(b) Section 2602.013, Insurance Code, as added by this Act,
and Section 2602.260, Insurance Code, as amended by this Act, apply
only to an action commenced on or after the effective date of this
Act. An action commenced before the effective date of this Act is
governed by the law applicable to the action immediately before the
effective date of this Act, and that law is continued in effect for
that purpose.
SECTION 33. This Act takes effect September 1, 2019.
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