Law:Title 11. Title Insurance (Texas)

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Subtitle A. General Provisions

Contents

Chapter 2501. General Provisions

Section  2501.001.  Short Title.

This title may be cited as the Texas Title Insurance Act.

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



Section  2501.002.  Purpose; Legislative Intent.

(a) The purpose of this title is to completely regulate the business of title insurance on real property and, as described by Subtitle F, on personal property, including the direct issuance of policies and the reinsurance of any assumed risks, to:

(1)  protect consumers and purchasers of title insurance policies; and

(2)  provide adequate and reasonable rates of return for title insurance companies and title insurance agents.

(b)  It is the express legislative intent that this title accomplish the purpose described by Subsection (a).

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

Amended by:

Acts 2007, 80th Leg., R.S., Ch. 543, Sec. 2, eff. September 1, 2007.



Section  2501.003.  Definitions.

In this title:

(1)  "Abstract plant" means an abstract plant as defined by the department under Section 2501.004.

(2)  "Attorney" means:

(A)  a person who is licensed to practice law and is a member of the State Bar of Texas; or

(B)  a Texas professional corporation organized to provide professional legal services.

(3)  "Direct operation" means the operations of a title insurance company under a license issued to the company under Subchapter B, Chapter 2651. A reference in this title to a title insurance agent shall be construed to include a direct operation unless the context indicates otherwise.

(4)  "Escrow officer" means an attorney, a bona fide employee of an attorney licensed as an escrow officer, a bona fide employee of a direct operation, or a bona fide employee of a title insurance agent whose responsibilities include:

(A)  countersigning title insurance forms;

(B)  supervising the preparation and delivery of title insurance forms;

(C)  signing escrow checks; or

(D)  closing the transaction, as described by Section 2501.006.

(5)  "Foreign title insurance company" means a title insurance company organized under the laws of a jurisdiction other than this state.

(6)  "Joint abstract plant operation" means a joint abstract plant operation as defined by the department under Section 2501.004.

(7)  "Person" includes an individual, corporation, association, partnership, or trust.

(8)  "Premium" means the premium rates promulgated by the commissioner under Subchapters D and E, Chapter 2703, and includes a charge for:

(A)  title examination and closing the transaction, regardless of whether the examination or closing is performed by an attorney; and

(B)  issuing the policy.

(9)  "Residential real property" means real property that is improved and is designed principally for occupancy by one to four families. The term includes an individual unit of a condominium or cooperative.

(10)  "Thing of value" includes any payment, advance, funds, loan, service, or other consideration.

(11)  "Title examination" means the search and examination of a title to determine the conditions of the title to be insured and to evaluate the risk to be undertaken in the issuance of a title insurance policy or other title insurance form.

(12)  "Title insurance" means:

(A)  insurance that insures, guarantees, or indemnifies an owner of real property, or another interested in the real property, against loss or damage resulting from:

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

(ii)  the invalidity or impairment of a lien on the real property;

(B)  personal property title insurance, as defined by Chapter 2751; or

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

(13)  "Title insurance agent" means a person owning or leasing and controlling an abstract plant or as a participant in a bona fide joint abstract plant operation and authorized in writing by a title insurance company to solicit insurance and collect premiums and to issue or countersign policies on the company's behalf.

(14)  "Title insurance company" means:

(A)  a domestic company organized under this title to engage in the business of title insurance, as described by Section 2501.005;

(B)  a foreign title insurance company that:

(i)  meets the requirements of this title; and

(ii)  holds a certificate of authority to engage in business in this state; or

(C)  any other domestic or foreign company that:

(i)  meets the requirements of this title; and

(ii)  holds a certificate of authority to insure a title to real property in this state.

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

Amended by:

Acts 2007, 80th Leg., R.S., Ch. 543, Sec. 3, eff. September 1, 2007.



Section  2501.004.  Abstract Plant; Joint Abstract Plant Operation.

(a) For purposes of this title, the department shall define "abstract plant" and "joint abstract plant operation."

(b)  To provide for the safety and protection of policyholders, the department shall require that an abstract plant:

(1)  be geographically arranged;

(2)  cover a period beginning not later than January 1, 1979, and be kept current; and

(3)  be adequate for use in insuring titles, as determined by the department.

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. 1, eff. September 1, 2009.



Section  2501.005.  Business Of Title Insurance.

(a) For purposes of this title, a person engages in the business of title insurance if the person:

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

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

(A)  soliciting;

(B)  title examination other than an examination conducted by an attorney;

(C)  closing the transaction other than a closing conducted by an attorney;

(D)  executing a contract of title insurance; and

(E)  insuring and transacting matters arising out of the contract after the contract is executed, including reinsurance; or

(3)  makes a guaranty or warranty of a title search or a title examination, or any component of a title search or title examination, if the person is not the person who performs the search or examination.

(b)  A person engages in the business of title insurance if the person engages in or proposes to engage in any business that is substantially equivalent to the business of title insurance as described by this section, regardless of whether that conduct is performed in a manner designed to evade the provisions of this title.

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



Section  2501.006.  Closing The Transaction.

(a) For purposes of this title, "closing the transaction" describes the investigation that is made:

(1)  on behalf of a title insurance company, title insurance agent, or direct operation before the title insurance policy is issued; and

(2)  to determine proper execution, acknowledgment, and delivery of all conveyances, mortgage papers, and other title instruments necessary to consummate a transaction.

(b)  Closing the transaction includes a determination that:

(1)  all delinquent taxes have been paid;

(2)  in the case of an owner title insurance policy, all current taxes, based on the latest available information, have been properly prorated between the purchaser and seller;

(3)  the consideration has been passed;

(4)  all proceeds have been properly disbursed;

(5)  a final search of the title has been made; and

(6)  all necessary papers have been filed for record.

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



Section 2501.007.  References To Title.

In this title, a reference to this title includes a reference to:

(1)  Chapter 223;

(2)  Chapter 271; and

(3)   Subchapter U, Chapter 171, Tax Code.

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

Amended by:

Acts 2005, 79th Leg., Ch. 728, Sec. 11.077, eff. September 1, 2005.



Section 2501.008.  Third-party Charges.

A title insurance company, title insurance agent, or direct operation may charge, separate from the title insurance premium, actual costs or a reasonable estimate of costs incurred in connection with a closing and settlement, including:

(1)  a charge by a third party for an electronic filing fee; or

(2)  a fee of a third party for the provision of an ad valorem tax report.

Added by Acts 2009, 81st Leg., R.S., Ch. 1159, Sec. 1, eff. January 1, 2010.

Chapter 2502. Prohibited Conduct

Subchapter A. Prohibited Conduct In General

Section  2502.001.  Engaging In Certain Insurance Business Prohibited.

(a) A domestic or foreign corporation operating under this title may not engage in the business of any kind of insurance other than title insurance.

(b)  A company may not engage in the business of title insurance if the company engages in the business of another kind of insurance.

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



Section  2502.002.  Coverage For Unmarketability Of Title Prohibited.

(a) An insurance company may not insure against loss or damage by reason of unmarketability of title.

(b)  The commissioner may not adopt a rule or form providing for coverage prohibited by this section.

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



Section  2502.003.  Insuring Around Defined; Prohibitions And Exceptions.

(a) Except as provided by Subsection (c), a title insurance company may not wilfully issue a binder for title insurance or a title insurance policy showing no outstanding enforceable recorded liens on real property against which the company knows an outstanding enforceable recorded lien exists.

(b)  A title insurance company knows that an outstanding enforceable recorded lien exists against real property if, based on an examination of the title under which the binder for title insurance or title insurance policy is issued, the company determines that the lien is valid and enforceable.

(c)  The commissioner by rule may approve circumstances under which a title insurance company may issue a binder for title insurance or a title insurance policy otherwise prohibited by Subsection (a).

(d)  Except as otherwise provided by this section, a title insurance company may determine the insurability of title to real property and any other matter that the company considers to be insurable under a binder for title insurance or a title insurance policy issued in connection with the property.

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



Section  2502.004.  Guarantee Of Mortgage Payment Prohibited.

(a) A title insurance company may not guarantee the payment of a mortgage on real property.

(b)  A title insurance company that violates this section forfeits its authority to engage in business in this state and shall immediately surrender its certificate of authority.

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



Section  2502.005.  Civil Penalty.

(a) A person is liable to the state for a civil penalty of not more than $5,000 if the person:

(1)  wilfully violates Section 2502.003 or 2502.004; or

(2)  violates an order of the commissioner refusing to approve an application to issue a binder for title insurance or a title insurance policy prohibited by Section 2502.003(a).

(b)  The department may bring an action in a Travis County district court to recover the penalty provided by this section.

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



Subchapter B. Rebates And Discounts

Section  2502.051.  Rebates And Discounts Prohibited.

A commission, rebate, discount, portion of a title insurance premium, or other thing of value may not be directly or indirectly paid, allowed, or permitted by a person engaged in the business of title insurance or received or accepted by a person for engaging in the business of title insurance or for soliciting or referring title insurance business.

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



Section  2502.052.  Certain Divisions Of Real Property Charges Prohibited.

Other than for services actually performed, a person may not give or accept any portion, split, or percentage of a charge made or received for a settlement or closing performed in connection with a transaction involving the conveyance or mortgaging of real property located in this state.

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



Section  2502.053.  Certain Compensatory Payments Not Prohibited.

This subchapter does not prohibit:

(1)  payment for services actually performed by a title insurance company, title insurance agent, or direct operation in connection with title examination or with closing the transaction or furnishing title evidence if:

(A)  the payment does not exceed the percentage of premium or other amount established by the commissioner for the payment; and

(B)  the person receiving the payment is licensed as provided by this title;

(2)  payment of bona fide compensation to a bona fide employee principally employed by a title insurance company, title insurance agent, or direct operation;

(3)  reasonable payment for goods or facilities actually provided and received; or

(4)  payment for services actually performed by an attorney in connection with title examination or with closing the transaction, if the payment does not exceed a reasonable charge for the services.

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



Section  2502.054.  Certain Divisions Of Premiums Not Prohibited.

(a) For purposes of this section, a subsidiary is a company at least 50 percent of the voting stock of which is owned by the title insurance company or by a wholly owned subsidiary of the title insurance company.

(b)  This subchapter does not:

(1)  prohibit a title insurance company from:

(A)  appointing as its title insurance agent for a county a person who owns or leases and operates an abstract plant for that county; and

(B)  arranging for a division of premiums with the agent as set by the commissioner; or

(2)  affect the division of a premium between a title insurance company and its subsidiary title insurance agent when the company directly issues a title insurance policy or contract under Section 2704.002.

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



Section 2502.055.  Promotional And Educational Activities Not Rebates.

(a) The activities described in this section are not rebates.  Nothing in this subchapter prohibits a title insurance company or a title insurance agent from:

(1)  engaging in legal promotional and educational activities that are not conditioned on the referral of title insurance business;

(2)  purchasing advertising promoting the title insurance company or the title insurance agent at market rates from any person in any publication, event, or media;

(3)  delivering to a party in the transaction or the party's representative legal documents or funds which are directly or indirectly related to a transaction closed by the title insurance company or title insurance agent; or

(4)  participating in an association of attorneys, builders, developers, realtors, or other real estate practitioners provided that the level of such participation does not exceed normal participation of a volunteer member of the association and is not activity that would ordinarily be performed by paid staff of an association.

(b)  "Market rate" means the price at which a seller, under no obligation or duress to sell, is willing to accept and a buyer, under no obligation or duress to buy, is willing to pay in an arms-length transaction.  The market rate is determined by comparing the rights or items purchased or sold to similar rights or items that have been recently purchased by others or sold to others, including others not in the title insurance business.

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

Amended by:

Acts 2005, 79th Leg., Ch. 631, Sec. 7, eff. September 1, 2005.



Section  2502.056.  Monetary Forfeiture.

(a) A person who pays or receives a commission, rebate, discount, or other thing of value for soliciting or referring title insurance business in violation of Section 2502.051 is engaging in the unauthorized business of insurance.

(b)  After notice and opportunity for hearing, a person who makes or receives a payment described by Subsection (a) is liable for a monetary forfeiture in an amount not less than the value of or more than three times the value of the payment.

(c)  A monetary forfeiture under Subsection (b) is in addition to any other penalty provided by law.

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


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