Law:Title 11. Title Insurance. Subtitle B. Organization Of Title Insurance Companies from Chapter 2552. Attorney's Title Insurance Companies And Title Attorneys (Texas)

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Subtitle B. Organization Of Title Insurance Companies

Contents

Chapter 2552. Attorney's Title Insurance Companies And Title Attorneys

Subchapter A. General Provisions

Section  2552.001.  Purpose; Legislative Intent.

(a) Except as otherwise expressly provided by this chapter, the purpose of this chapter is to regulate an attorney's title insurance company in the same manner as a title insurance company engaged in the business of title insurance under this title.

(b)  It is the express intent of the legislature to achieve the purpose described by Subsection (a).

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.002.  Definitions.

In this chapter:

(1)  "Attorney's title insurance" means:

(A)  insurance that:

(i)  insures, guarantees, or indemnifies an owner of real property in this state, or another interested in the real property, against loss or damage resulting from:

(a)  a lien or encumbrance on or defect in the title to the real property; or

(b)  the invalidity of a lien on the real property; and

(ii)  is issued only in connection with and as part of a real property transaction and a title opinion of a title attorney; or

(B)  any business that is substantially equivalent to the insurance business described by Paragraph (A) and is conducted in a manner designed to evade the provisions of this title.

(2)  "Attorney's title insurance company" means a domestic company organized and operated in accordance with this chapter for the business of attorney's title insurance.

(3)  "Title attorney" means an attorney who satisfies the requirements of this chapter to act as a title attorney in this state for an attorney's title insurance company.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.003.  Applicability Of Title 11.

Except as otherwise expressly provided by this chapter:

(1)  this title applies to an attorney's title insurance company;

(2)  the provisions of this title that apply to a title insurance company also apply to an attorney's title insurance company;

(3)  the provisions of this title that apply to a title insurance agent also apply to a title attorney; and

(4)  any rule adopted or premium promulgated by the commissioner under this title applies to an attorney's title insurance company and to a title attorney.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.004.  Business Of Attorney's Title Insurance.

(a) The business of attorney's title insurance may be engaged in only by an attorney's title insurance company through a title attorney appointed by an attorney's title insurance company.

(b)  For purposes of this chapter, a person engages in the business of attorney's title insurance if the person:

(1)  as insurer, guarantor, or surety, makes or proposes to make a contract or policy of title insurance; or

(2)  transacts or proposes to transact any phase of title insurance, including:

(A)  soliciting;

(B)  negotiating before executing a title insurance contract;

(C)  executing a contract of title insurance; and

(D)  insuring and transacting matters arising out of the contract after the contract is executed, including reinsurance.

(c)  A person engages in the business of attorney's title insurance if the person engages in or proposes to engage in any business that is substantially equivalent to the business of attorney's title insurance as part of a real property transaction and title opinion of a title attorney in a manner designed to evade the applicable provisions of this title.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.005.  Other Title Insurance Companies And Agents Prohibited.

A title insurance company, title insurance agent, or escrow officer of a title insurance agent licensed under this title to engage in the business of title insurance in this state may not operate as an attorney's title insurance company or act as a title attorney under this chapter.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.006.  Record Of Title Attorneys.

The department shall maintain a record of the name and address of each title attorney in a manner that allows a person on request to conveniently ascertain and inspect the title attorneys appointed by an attorney's title insurance company authorized to engage in the business of attorney's title insurance in this state.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.007.  Other Premium Or Fee Prohibited.

Attorney's title insurance may not be issued for any premium or fee other than the applicable prescribed premium as provided by Subchapters D and E, Chapter 2703.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Subchapter B. Organization Of Attorney's Title Insurance Company

Section  2552.051.  Organizing Members.

Fifteen or more members of the State Bar of Texas who are residents of this state may organize a private corporation to act as an attorney's title insurance company.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.052.  Capital Share And Surplus Requirements Generally.

(a) At the time of organization, an attorney's title insurance company must have the capital and surplus required of a title insurance company under Section 2551.053(a).

(b)  The capital shares of an attorney's title insurance company may be issued for a par value of $100 or more per share and in one or more classes.

(c)  The capital shares, regardless of class, must be subscribed and paid for and owned by and issued to licensed members of the State Bar of Texas, each of whom is a resident of this state and is qualified to be appointed a title attorney under this chapter, subject to the right of reacquisition under Section 2552.054.

(d)  Each certificate evidencing any share must have endorsed on the certificate provisions relating to limitation on the alienation of the shares indicating that the shares may be owned only by qualifying attorneys or the attorney's title insurance company issuing the shares.

(e)  The requirements prescribed by Subsections (a), (c), and (d) do not apply to an attorney's title insurance company described by Section 2552.053 or to capital shares of an attorney's title insurance company owned under that section.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.053.  Capital Share And Surplus Requirements For State Bar Entity.

(a) An association of the organized State Bar of Texas, the State Bar of Texas, or any foundation created by or through the State Bar of Texas, the purposes of which include the continuing legal education of the bench and bar of this state, may own any class of capital shares of an attorney's title insurance company if, at all times, at least 15 members of the State Bar of Texas who are residents of this state own capital shares, whether or not of the same class, in the attorney's title insurance company.

(b)  An attorney's title insurance company created as an affiliate or subsidiary of the organized State Bar of Texas, the State Bar of Texas, or any foundation created by or through the State Bar of Texas must have a paid-up capital of at least $250,000 and a surplus of at least $150,000.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.054.  Reacquisition Of Shares.

(a) The capital shares of an attorney's title insurance company are subject to the right of reacquisition of the shares by the attorney's title insurance company in the event of:

(1)  the death of the attorney shareholder;

(2)  the failure of the attorney shareholder to remain a licensed member of the State Bar of Texas; or

(3)  the failure of the attorney shareholder to remain appointed and qualified to be appointed a title attorney under this chapter.

(b)  An attorney's title insurance company must reacquire a deceased attorney shareholder's shares within nine months of the attorney shareholder's death.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.055.  Reacquisition Plan Required.

(a) As part of the application for the approval of the charter of an attorney's title insurance company, the applicants must file with the department an acceptable plan providing for the reacquisition of all shares of stock of the attorney's title insurance company issued to a qualified attorney when the attorney is no longer qualified to own the shares or on the death of the attorney.

(b)  The plan must be approved by the department.

(c)  In addition to other provisions, the plan must include an express provision that the attorney's title insurance company may not reacquire under any circumstance outstanding shares of its stock as treasury stock if the reacquisition will result in reducing its capital and surplus below the minimum capital and surplus required for the initial organization of the attorney's title insurance company.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.056.  Inapplicability Of Laws Regulating Securities.

(a) All state laws, other than this title, that provide for supervision, registration, or regulation in connection with the sale, issuance, or offering of securities do not apply to the sale, issuance, or offering of any capital stock to a person authorized under this chapter to own the capital stock.

(b)  The sale, issuance, or offering of any stock described by this section is legal without any action or approval by any official or state regulatory agency authorized to license, regulate, or supervise the sale, issuance, or offering of securities.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Subchapter C. Title Attorney's License And Renewal

Section  2552.101.  License And Other General Requirements.

To act as a title attorney in this state for an attorney's title insurance company, an attorney must:

(1)  be a member in good standing of the State Bar of Texas;

(2)  own one or more shares of stock in the attorney's title insurance company by which the attorney is appointed;

(3)  be actively engaged in the practice of law;

(4)  meet the requirements prescribed by this chapter regarding an abstract plant;

(5)  be appointed by an attorney's title insurance company as its title attorney authorized by the attorney's title insurance company to solicit insurance, collect premiums, and issue or countersign policies on behalf of the attorney's title insurance company;

(6)  be certified as a title attorney to the department;

(7)  hold a license issued by the department under this subchapter; and

(8)  maintain a surety bond or deposit as required by Section 2552.154.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.102.  License Application.

(a) Before an initial license is issued to an attorney to act as a title attorney in this state for an attorney's title insurance company, the attorney's title insurance company must file an application for a title attorney's license with the department on forms provided by the department.

(b)  The application must be:

(1)  accompanied by a nonrefundable fee in an amount not to exceed $50 as prescribed by the department; and

(2)  signed and sworn to by the attorney's title insurance company and the proposed title attorney.

(c)  The completed application must state that:

(1)  the proposed title attorney:

(A)  is a licensed attorney in this state and a resident of this state;

(B)  is actively engaged in the practice of law;

(C)  is known to the attorney's title insurance company:

(i)  to have a good business reputation;

(ii)  to be a current member, in good standing, of the State Bar of Texas; and

(iii)  to be worthy of the public trust; and

(D)  meets the qualifications for a title attorney as prescribed by this chapter; and

(2)  the attorney's title insurance company does not know of any fact or condition that would disqualify the proposed title attorney from receiving a license.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.103.  License Issuance And Delivery.

(a) The department shall issue a title attorney's license if the department determines, based on the application and the department's investigation, that the requirements of Section 2552.102 are satisfied.

(b)  The department shall deliver the license to the attorney's title insurance company for transmittal to the title attorney.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.104.  Duplicate License.

(a) The department shall collect in advance a fee from a license holder who requests a duplicate title attorney's license.

(b)  The department shall prescribe the fee in an amount not to exceed $20.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.105.  License Term.

Unless a system of staggered renewal is adopted under Section 4003.002, a title attorney's license expires on June 1 following the date of issuance.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.106.  Automatic Termination Of License.

The license of each title attorney appointed by an attorney's title insurance company that surrenders its certificate of authority or has its certificate revoked by the department is automatically terminated without notice.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.107.  License Surrender Or Forfeiture.

(a) A title attorney may voluntarily surrender the title attorney's license at any time by giving notice to the department and to the attorney's title insurance company.

(b)  A title attorney automatically forfeits the title attorney's license under the attorney's title insurance company if the title attorney terminates the title attorney's relationship with the attorney's title insurance company.

(c)  A surrender or forfeiture of a title attorney's license under this section does not affect the culpability of the license holder for conduct committed before the effective date of the surrender or forfeiture. The department may institute a disciplinary proceeding against the former license holder for conduct committed before the effective date of the surrender or forfeiture.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.108.  Continuation Of License.

(a) Not later than the 30th day after the date an attorney's title insurance company terminates its contract with a title attorney or gives notice of termination to the title attorney, the title attorney may apply to the department for continuation of the title attorney's license.

(b)  The application must include an amendment to the license stating the name of another attorney's title insurance company for which the title attorney is or will be authorized to act.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Subchapter D. Title Attorney General Requirements

Section  2552.151.  Contract Required For Appointment.

(a) A title attorney must be appointed by an attorney's title insurance company by contract.

(b)  The contract must make arrangements for division of premium as may be approved by the department under this title.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.152.  Abstract Plant Requirements.

(a) A title attorney must:

(1)  own or lease and control a licensed abstract plant;

(2)  participate in a bona fide joint abstract plant operation;

(3)  contract in accordance with this subchapter to obtain title evidence from a licensed abstract plant; or

(4)  use title evidence provided by an approved abstract plant owned or leased and controlled by the attorney's title insurance company.

(b)  If at the time of applying for a license under Section 2552.102 an attorney does not own or lease and control a licensed abstract plant, is not a participant in a bona fide joint abstract plant operation, and is unable to contract to obtain title evidence from a licensed abstract plant located in the county in which the attorney resides, the attorney, as part of the license application, may satisfy the requirements of this section by filing with the department on a form prescribed by the department a disclosure of the inability to obtain the contract.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.153.  Contract With Licensed Abstract Plant.

(a) A title attorney may enter into a contract with a licensed abstract plant under which the abstract plant provides title evidence to the title attorney. The contract must:

(1)  be on a form prescribed by the commissioner; and

(2)  state the standards for the evidence to be provided.

(b)  The commissioner may change the form of the contract.

(c)  The parties to the contract shall determine the portion of the premium to be paid by the title attorney to the licensed abstract plant, subject to approval by the department.

(d)  The department may disapprove any division of the premium that the department determines to be excessive or inadequate. The contract is considered to be approved as to the division of the premium until the parties are notified of disapproval by the department.

(e)  The portion of the premium to be paid to the licensed abstract plant is considered to be in compliance with Section 2502.053(1).

(f)  The parties to the contract shall file with the department a copy of the contract not later than the 10th day after the date of execution of the contract.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.154.  Bond Or Deposit Required.

(a) A title attorney shall make, file, and pay for a surety bond payable to the department in the amount of $7, 500 and issued by a corporate surety company authorized to write surety bonds in this state. The bond shall obligate the principal and surety to pay any pecuniary loss that is incurred by:

(1)  a participant in a real property settlement or closing in which an attorney's title insurance policy is issued by the title attorney and that is sustained through an act of fraud, dishonesty, theft, embezzlement, or wilful misapplication by a title attorney; and

(2)  any party to an escrow agreement in which the title attorney is escrowee and that is sustained through an act of fraud, dishonesty, forgery, theft, embezzlement, or wilful misapplication by the title attorney, either directly and alone or in conspiracy with another person.

(b)  Instead of a surety bond, a title attorney may deposit with the department cash or securities approved by the department in the amount of $7,500, subject to the same conditions required for the bond.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.155.  Examination Of Loss Covered By Bond.

(a) At any time it appears that the terms of a title attorney's bond may have been violated, the department may require the title attorney to appear in Travis County, with records the department determines to be proper, for an examination.

(b)  The department shall specify a date for the examination that is not earlier than the 10th day or later than the 15th day after the date of service of notice of the requirement to appear.

(c)  If after the examination the department determines that the terms of the bond have been violated, the department shall immediately notify the surety and prepare a written statement of the facts of the loss and deliver the statement to the attorney general.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.156.  Investigation By Attorney General.

(a) On receipt of a written statement under Section 2552.155, the attorney general shall investigate the charges and, on determining that the terms of the bond have been violated, shall enforce the liability against cash or securities or by filing suit on the bond.

(b)  A suit brought under this section shall be filed in the name of the department in Travis County for the benefit of all parties who have suffered any loss because of the violation.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.157.  Authority To Issue Policy.

A title attorney may issue a title insurance policy for an attorney's title insurance company only if the title attorney:

(1)  is appointed by the attorney's title insurance company as its title attorney;

(2)  bases each title opinion on separate and current title evidence, provided by a licensed abstract plant, of the records of the county in which the real property, the title to which is to be insured, is located; and

(3)  pays to the licensed abstract plant the portion of the premium agreed to by the title attorney and the abstract plant and approved by the department, if the title attorney contracts to obtain the title evidence from the abstract plant as provided by Section 2552.153.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.158.  Authority To Deliver But Not Issue Policy.

A title attorney may deliver, but not issue, a title insurance policy in conformity with Subchapter A, Chapter 2704, if:

(1)  the title attorney does not own or lease and control a licensed abstract plant, is not a participant in a bona fide joint abstract plant operation, and is unable to contract with a licensed abstract plant to obtain the required title evidence in the county in which the real property, the title to which is to be insured, is located; or

(2)  the title insurance policy is based on a certified abstract of title prepared by a licensed abstract plant covering the particular real property from the sovereignty of the soil to the date of the transaction.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Subchapter E. Powers And Duties Of Attorney's Title Insurance Companies

Section  2552.201.  Acting As Title Attorney. An

attorney's title insurance company may not permit an attorney to act as its title attorney in this state, including by writing, signing, or delivering title insurance policies, unless the attorney holds a license issued under Subchapter C and maintains a surety bond or deposit as required by Section 2552.154.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.202.  List Of Title Attorneys.

(a) An attorney's title insurance company shall certify to the department the name and address of each title attorney appointed by the attorney's title insurance company.

(b)  The certification required by this section must:

(1)  be on a form provided by the department; and

(2)  be made on or before June 1 of each year unless a system of staggered renewal is adopted under Section 4003.002.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.203.  Renewal. An

attorney's title insurance company shall apply for license renewal and pay a fee prescribed by the department in an amount not to exceed $50 for each title attorney listed under Section 2552.202.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.204.  Notice Of Termination.

An attorney's title insurance company that terminates the appointment of a title attorney shall:

(1)  immediately notify the department in writing of the termination and request cancellation of the title attorney's license; and

(2)  notify the title attorney of the action by the attorney's title insurance company.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Subchapter F. Audit And Examination Requirements Relating To Trust Fund Accounts

Section  2552.251.  Annual Audit.

(a) A title attorney shall have an annual audit made of trust fund accounts. The title attorney shall pay for the audit.

(b)  The audit must be performed by an independent certified public accountant or licensed public accountant, or a firm composed of either, recommended by the title attorney and approved by the attorney's title insurance company represented by the title attorney.

(c)  The audit must include disclosure of payments made for title evidence under a contract under Section 2552.153 and to whom the payments were made.

(d)  Not later than the 90th day after January 1 of each year, the title attorney shall send by certified mail, postage prepaid, to the department one copy of the audit report with a transmittal letter. The title attorney shall also send a copy of the audit report and transmittal letter to the attorney's title insurance company represented by the title attorney.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.252.  Analysis Of Annual Audit. (a)

An attorney's title insurance company shall examine and analyze the annual audit report received from each of its title attorneys under Section 2552.251.

(b)  Not later than three months after the date the audit report is received, the attorney's title insurance company shall file with the department, on a form prescribed by the department, a report of the findings and results of the examination and analysis of the audit report.

(c)  If an attorney's title insurance company fails to receive an audit report from a title attorney within the time required by Section 2552.251, the attorney's title insurance company shall promptly report that fact to the department.

(d)  After the report of the examination and analysis is filed with the department by an attorney's title insurance company, the department may classify the report as confidential and privileged.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.253.  Examination Of Trust Fund Accounts; Transaction Reports.

(a) An attorney's title insurance company, through its examiners or auditors or through independent certified public accountants commissioned by the attorney' s title insurance company, may examine at any time the trust fund accounts and records relating to the accounts of any of its title attorneys.

(b)  The attorney's title insurance company shall pay for the examination of the accounts and records.

(c)  An attorney's title insurance company may require from any of its title attorneys special reports regarding any of their transactions.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.254.  Enforcement; Hearing.

(a) After notice and hearing, the department may revoke the license of a title attorney who:

(1)  fails to furnish an annual audit report within the time required by Section 2552.251; or

(2)  furnishes an audit report that reveals any irregularity, including a shortage, or any practice not in keeping with sound, honest business practices.

(b)  The notice must be provided to the title attorney and the attorney's title insurance company represented by the title attorney.

(c)  At a hearing under this section, the title attorney and the attorney's title insurance company may offer evidence explaining or excusing a failure or irregularity.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Subchapter G. License Denial And Disciplinary Action

Section  2552.301.  Grounds For License Denial Or Disciplinary Action. The Depa

rtment may deny an application for a title attorney's license or discipline a title attorney under Sections 4005.102, 4005.103, and 4005.104 if the department determines that the applicant or license holder:

(1)  has wilfully violated this title;

(2)  has intentionally made a material misstatement in the license application;

(3)  has obtained or attempted to obtain the license by fraud or misrepresentation;

(4)  has misappropriated or converted to the applicant's or license holder's own use or illegally withheld money belonging to an attorney's title insurance company, an insured, or another person;

(5)  has been guilty of fraudulent or dishonest practices;

(6)  has materially misrepresented the terms and conditions of a title insurance policy or contract;

(7)  has 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;

(8)  is no longer a member of the State Bar of Texas; or

(9)  is no longer actively engaged in the practice of law.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.



Section  2552.302.  License Application After Denial, Refusal, Or Revocation.

(a) An applicant whose license application has been denied or refused or a license holder whose license has been revoked under this subchapter may not file another application for a title attorney's license before the first anniversary of:

(1)  the effective date of the denial, refusal, or revocation; or

(2)  the date of a final court order affirming the denial, refusal, or revocation if judicial review is sought.

(b)  A license application filed after the time required by this section may be denied by the department unless the applicant shows good cause why the denial, refusal, or revocation should not be a bar to the issuance of a license.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1, 2005.


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