CHAPTER 2502. PROHIBITED CONDUCT - Texas Statutes

INSURANCE CODE

TITLE 11. TITLE INSURANCE

SUBTITLE A. GENERAL PROVISIONS

CHAPTER 2502. PROHIBITED CONDUCT

SUBCHAPTER A. PROHIBITED CONDUCT IN GENERAL

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.