Law:Title 11. Title Insurance. Subtitle E. The Business Of Title Insurance from Chapter 2703. Policy Forms And Premium Rates (Texas)

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Subtitle E. The Business Of Title Insurance

Contents

Chapter 2703. Policy Forms And Premium Rates

Subchapter A. General Provisions

Section  2703.001.  Compliance With Title And Rules.

(a) This section applies to a corporation organized under this title, a foreign corporation, and, to the extent that the corporation is engaged in the business of title insurance, a corporation organized under another law, including:

(1)  Subdivision 57, Article 1302, Revised Statutes, before repeal of that statute; and

(2)  Chapter 861.

(b)  A corporation operates in this state under the control and supervision of the commissioner and under uniform rules adopted by the commissioner relating to:

(1)  forms of policies and underwriting contracts;

(2)  premiums for those policies and contracts; and

(3)  underwriting standards and practices.

(c)  With respect to real property located in this state, a corporation may not issue any kind of title insurance coverage, any kind of guarantee, or reinsurance of a risk assumed under a title insurance policy, except as provided by Section 2551.305(a), unless the corporation is authorized to engage in the business of title insurance under this title and otherwise complies with this title. In engaging in the business of title insurance with respect to real property located in this state, the corporation shall comply with this title and rules described by Subsection (b), including when:

(1)  issuing any kind of title insurance policy or an underwriting contract;

(2)  reinsuring any portion of a risk assumed under a title insurance policy; and

(3)  deleting a title insurance policy exclusion.

(d)  Title insurance coverage, reinsurance, or a guarantee issued in violation of Subsection (c) is invalid.

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



Section  2703.002.  Use Of Forms In General.

A title insurance company or title insurance agent may not use a form required under this title to be prescribed or approved until the commissioner has prescribed or approved the form.

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



Section  2703.003.  Payment Of Premiums.

The premium for a title insurance policy or for another form prescribed or approved by the commissioner shall be paid in the due and ordinary course of business.

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



Subchapter B. Policy Provisions

Section  2703.051.  Certain Provisions Required.

A title insurance policy delivered or issued for delivery in this state to insure an owner of real property must include certain provisions, the form and content of which shall be prescribed by the commissioner, in accordance with this subchapter.

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



Section  2703.052.  Duty Of Title Insurance Company.

(a) On a report to a title insurance company made by an insured after a title insurance policy has been issued that a lien, encumbrance, or title defect exists that is not excepted under the policy or otherwise excluded from coverage, the company shall promptly investigate to determine whether the lien or encumbrance is valid and not barred by statute or other law.

(b)  A title insurance company that concludes that a valid lien or encumbrance that is not barred by statute or other law exists or that a title defect exists shall:

(1)  institute all necessary legal proceedings to clear the title to the property;

(2)  indemnify the insured according to the terms of the policy;

(3)  reinsure at current value the title to the property without making exception to the lien, encumbrance, or defect or indemnify another insurer for reinsuring the title without making exception to the lien, encumbrance, or defect;

(4)  secure a release of the lien, encumbrance, or defect; or

(5)  take a combination of the actions described by this subsection.

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



Section  2703.053.  Establishment Of Standards And Schedules.

The commissioner by rule shall establish standards and time schedules for implementing and handling claims by title insurance companies in accordance with this subchapter.

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



Section  2703.054. 

 AUTHORITY OF COMMISSIONER IN IMPLEMENTING

Subchapter

. (a) The commissioner may adopt, by amendment to an owner title insurance policy or by separate endorsement to an owner title insurance policy, language to implement this subchapter in a manner consistent with the terms, provisions, conditions, and stipulations of the policy or the exceptions to coverage contained in the schedules to the policy.

(b)  This subchapter does not prohibit the commissioner from adopting for use in this state one or more policies in a simplified, generally more understandable, and usable form.

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



Subchapter C. Policy Forms For Residential Real Property

Section  2703.101.  Policy Forms For Residential Real Property.

(a) The commissioner shall prescribe an owner title insurance policy form to be issued in connection with a transaction involving residential real property in this state.

(b)  A title insurance company or title insurance agent shall use the form prescribed by the commissioner in issuing to an individual an owner title insurance policy relating to residential real property in this state.

(c)  Unless authorized by rule adopted by the commissioner, an insurer may not enter into a contract or other agreement concerning an individual title insurance policy if the contract or other agreement is not expressed in the policy. A contract or agreement prohibited by this subsection is void.

(d)  An endorsement prescribed by the commissioner may be attached to the title insurance policy form as authorized by rule adopted by the commissioner.

(e)  The commissioner may not prescribe an owner title insurance policy form for residential real property or an endorsement to the policy if the policy form or endorsement is not written in plain language. For purposes of this subsection, a policy form or endorsement is written in plain language if it achieves the minimum score established by the commissioner on the Flesch reading ease test or an equivalent test selected by the commissioner or, at the commissioner's option, if it conforms to the language requirements in a National Association of Insurance Commissioners model act relating to plain language. This subsection does not apply to policy language required by state or federal law.

(f)  For an owner title insurance policy on residential real property that is issued to an individual, the commissioner may adopt coverages that insure against ad valorem taxes, including penalties and interest, to be paid with respect to the property for a previous tax year:

(1)  that are delinquent on the effective date of the policy because of sale, diversion, or change of use, unless excluded because the insured has actual knowledge of the delinquent taxes; or

(2)  that result from an exemption granted to a previous owner of the property under Section 11.13, Tax Code, or from an improvement not assessed for a previous tax year, unless excluded because the insured has actual knowledge of the taxes.

(g)  For an owner's title insurance policy on residential real property that is issued to an individual, the commissioner shall adopt terms that provide for continuation of coverage subject to rights and defenses against the original named insured for:

(1)  a person who inherits the original named insured's title on the original named insured's death;

(2)  the original named insured's spouse who receives title in a dissolution of marriage with the original named insured;

(3)  the trustee or successor of a trust established by the original named insured to whom the original named insured transfers title after the date of policy; or

(4)  the beneficiaries of a trust described by Subdivision (3) on the death of the original named insured.

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

Amended by:

Acts 2009, 81st Leg., R.S., Ch. 985, Sec. 1, eff. September 1, 2009.



Subchapter D. Fixing And Promulgating Premium Rates

Section  2703.151.  Fixing And Promulgating Premium Rates.

(a) Except as provided by Subsection (b), the commissioner shall fix and promulgate the premium rates to be charged by a title insurance company or by a title insurance agent for title insurance policies or for other forms prescribed or approved by the commissioner.

(b)  The commissioner may not fix or promulgate the premium rates for reinsurance between title insurance companies. Title insurance companies may establish the premium rates in amounts to which the companies agree.

(c)  Except for a premium charged for reinsurance, a premium may not be charged for a title insurance policy or for another prescribed or approved form at a rate different than the rate fixed and promulgated by the commissioner.

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



Section  2703.152.  Factors Considered In Fixing Premium Rates.

(a) In fixing premium rates, the commissioner shall consider all relevant income and expenses of title insurance companies and title insurance agents attributable to engaging in the business of title insurance in this state.

(b)  The premium rates fixed by the commissioner must be:

(1)  reasonable as to the public; and

(2)  nonconfiscatory as to title insurance companies and title insurance agents.

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



Section 2703.153.  Collection Of Data For Fixing Premium Rates; Annual Statistical Report.

(a) Each title insurance company and title insurance agent engaged in the business of title insurance in this state shall annually submit to the department, as required by the department to collect data to use to fix premium rates, a statistical report containing information relating to:

(1)  loss experience;

(2)  expense of operation; and

(3)  other material matters.

(b)  The information must be submitted in the form prescribed by the department.

(c)  If the department requires a title insurance company or title insurance agent to include new or different information in the statistical report, that information may be considered by the commissioner in fixing premium rates if the information collected is reasonably credible for the purposes for which the information is to be used.

(d)  A title insurance company or a title insurance agent aggrieved by a department requirement concerning the submission of information may bring a suit in a district court in Travis County alleging that the request for information:

(1)  is unduly burdensome; or

(2)  is not a request for information material to fixing and promulgating premium rates or another matter that may be the subject of the biennial hearing and is not a request reasonably designed to lead to the discovery of that information.

(e)  On filing of a suit under Subsection (d), the requirement that the title insurance company or title insurance agent bringing the suit comply with the request for the information is abated as to that title insurance company or title insurance agent. The district court may enter an order requiring the title insurance company or title insurance agent to comply with the request for information subject to the limitations, if any, imposed by the court.

(f)  A title insurance company or title insurance agent must bring suit under Subsection (d) not later than the 30th day after the date the company or agent receives the request for information from the department.

(g)  This section may not be construed to limit the department's authority to request information under Section 38.001 or other applicable provisions of this code.

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

Amended by:

Acts 2007, 80th Leg., R.S., Ch. 930, Sec. 1, eff. September 1, 2007.



Subchapter E. Procedures Regarding Premium Rates, Policy Forms, And Other Related Matters

Section  2703.201.  Hearing Required For Fixing Premium Rate.

Before a premium rate may be fixed and a premium charged, the department must provide reasonable notice and a hearing must be afforded to title insurance companies, title insurance agents, and the public.

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



Section  2703.202.  Hearing Required For Change In Premium Rate.

(a) A premium rate previously fixed by the commissioner may not be changed until after the commissioner holds a public hearing.

(b)  At the request of a title insurance company or the office of public insurance counsel, the commissioner shall order a public hearing to consider changing a premium rate.

(c)  Except as provided by Subsection (d), a public hearing held under Subsection (a) or under Section 2703.206 shall be conducted by the commissioner as a rulemaking hearing under Subchapter B, Chapter 2001, Government Code.

(d)  Notwithstanding Subsection (c), at the request of a title insurance company or the public insurance counsel, a public hearing held under Subsection (a) or under Section 2703.206 must be conducted by the commissioner as a contested case hearing under Subchapters C through H and Subchapter Z, Chapter 2001, Government Code.

(e)  Information received or requested by the commissioner as part of an individual audit or examination under Chapters 2602 and 2651 may not be used for rate setting under Subchapter D, Chapter 2703.  Nothing in this section prohibits a party from conducting discovery in a ratemaking or other proceeding or producing other information requested by the department, or verifying the data reported under a statistical plan or report promulgated by the commissioner.

(f)  Subsections (c) through (e) apply only to a public hearing held on or after January 1, 2009.

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

Amended by:

Acts 2009, 81st Leg., R.S., Ch. 1025, Sec. 17, eff. September 1, 2009.



Section 2703.203.  Biennial Hearing.

The commissioner shall hold a biennial public hearing not earlier than July 1 of each even-numbered year to consider adoption of premium rates and other matters relating to regulating the business of title insurance that an association, title insurance company, title insurance agent, or member of the public admitted as a party under Section 2703.204 requests to be considered or that the commissioner determines necessary to consider.

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

Amended by:

Acts 2007, 80th Leg., R.S., Ch. 930, Sec. 1, eff. September 1, 2007.



Section 2703.204.  Admission As Party To Biennial Hearing.

(a) Subject to this section, an  individual or association or other entity recommending adoption of a premium rate or another matter relating to regulating the business of title insurance shall be admitted as a party to the biennial hearing.

(b)  A party to the ratemaking phase of the biennial hearing may request that the commissioner remove any other party to the ratemaking phase of the hearing on the grounds that the other party does not have a substantial interest in title insurance. A decision of the commission to deny or grant the request is final and subject to appeal in accordance with Section 36.202.

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

Amended by:

Acts 2007, 80th Leg., R.S., Ch. 930, Sec. 2, eff. September 1, 2007.



Section  2703.205.  Phases Of Biennial Hearing.

(a) The biennial hearing consists of:

(1)  a rulemaking phase to consider rules, forms, endorsements, and related matters that do not have rate implications; and

(2)  a ratemaking phase to consider fixing of premium rates and other matters that have rate implications.

(b)  The commissioner shall certify which matters have rate implications to be considered in the ratemaking phase of the hearing.

(c)  Except as provided by Subsection (d), the commissioner shall conduct both phases of the hearing.

(d)  At the direction of the commissioner or at the written request of an association or other entity recommending adoption of a premium rate and seeking admission as a party to the ratemaking phase of the hearing, the State Office of Administrative Hearings shall conduct the ratemaking phase of the hearing in accordance with Chapter 40.  A request under this subsection must be made at the time the association or entity seeks to be admitted as a party to the hearing but may not be made later than the 10th day after the date notice of the hearing is provided under Section 2703.207.

(e)  The ratemaking phase of the hearing shall be conducted as a contested case in accordance with Chapter 2001, Government Code.

(f)  A party's presentation of relevant, admissible oral testimony may not be limited.

(g)  Each matter in each phase of the hearing shall be considered by the commissioner and decisions on the matters made in an open meeting.

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

Amended by:

Acts 2007, 80th Leg., R.S., Ch. 930, Sec. 3, eff. September 1, 2007.



Section  2703.206.  Commissioner Authority To Hold Hearings As Necessary.

At any time, the commissioner may order a public hearing to consider adoption of premium rates and other matters relating to regulating the business of title insurance as the commissioner determines necessary or proper.

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



Section  2703.207.  Notice Of Certain Hearings. Not Late

r than the 60th day before the date of a hearing under Section 2703.202, 2703.203, or 2703.206, notice of the hearing and of each item to be considered at the hearing shall be:

(1)  sent directly to all title insurance companies and title insurance agents; and

(2)  provided to the public in a manner that gives fair notice concerning the hearing.

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



Section  2703.208.  Additions Or Amendments To Manual.

(a) An addition or amendment to the Basic Manual of Rules, Rates, and Forms for the Writing of Title Insurance in the State of Texas may be proposed and adopted by reference by publishing notice of the proposal or adoption by reference in the Texas Register.

(b)  Notice under this section must include:

(1)  a brief summary of the substance of the matter to be added or amended; and

(2)  a statement that the full text of the matter is available for review in the office of the chief clerk of the department.

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


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