Bill Text: TX SB2333 | 2019-2020 | 86th Legislature | Comm Sub
Bill Title: Relating to the operation of the Texas Title Insurance Guaranty Association.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2019-05-15 - Removed from local & uncontested calendar [SB2333 Detail]
Download: Texas-2019-SB2333-Comm_Sub.html
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 |
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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, [ |
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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) [ |
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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) [ |
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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 [ |
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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; [ |
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(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 [ |
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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[ |
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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 [ |
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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 [ |
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account the amount of money the association determines [ |
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efficient future administration [ |
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The[ |
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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 [ |
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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, [ |
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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 [ |
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promptly estimate the amount of additional money needed to | ||
supplement the assets of the impaired title insurance company [ |
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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 [ |
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association shall give each [ |
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be assessed at least 90 days' written notice of the due date of the | ||
assessment [ |
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[ |
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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 [ |
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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 [ |
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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 [ |
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[ |
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(b) A covered claim under Section 2602.252 may not exceed | ||
the lesser of $500,000 [ |
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money actually received by [ |
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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 [ |
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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 [ |
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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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