CHAPTER 2651. TITLE INSURANCE AGENTS AND DIRECT OPERATIONS - Texas Statutes

INSURANCE CODE

TITLE 11. TITLE INSURANCE

SUBTITLE D. TITLE INSURANCE PROFESSIONALS

CHAPTER 2651. TITLE INSURANCE AGENTS AND DIRECT OPERATIONS

SUBCHAPTER A. TITLE INSURANCE AGENT'S LICENSE

Sec. 2651.001. LICENSE AND BOND OR DEPOSIT REQUIRED. (a) An

individual, firm, association, or corporation may not act in this

state as a title insurance agent for a title insurance company

unless the individual or entity:

(1) holds a license as an agent issued by the department; and

(2) maintains a surety bond or deposit required under Subchapter

C.

(b) A title insurance company may not allow or permit an

individual, firm, association, or corporation to act as its agent

in this state unless the individual or entity complies with this

section.

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

2005.

Sec. 2651.002. LICENSE APPLICATION. (a) Before an initial

license is issued to an individual, firm, association, or

corporation to act as an agent in this state for a title

insurance company, the company must file an application for an

agent's license with the department on forms provided by the

department.

(b) The application must be:

(1) accompanied by a nonrefundable license fee; and

(2) signed and sworn to by the title insurance company and by

the proposed agent.

(c) The completed application must state that:

(1) the proposed agent is:

(A) an individual who is a bona fide resident of this state;

(B) an association or firm composed only of Texas residents; or

(C) a Texas corporation or a foreign corporation authorized to

engage in business in this state;

(2) the proposed agent has unencumbered assets in excess of

liabilities, exclusive of the value of abstract plants, as

required by Section 2651.012;

(3) the proposed agent, including a corporation's managerial

personnel, if applicable, has reasonable experience or

instruction in the field of title insurance;

(4) the title insurance company:

(A) knows that the proposed agent has a good business reputation

and is worthy of the public trust; and

(B) is unaware of any fact or condition that disqualifies the

proposed agent from receiving a license; and

(5) the proposed agent qualifies as a title insurance agent

under this chapter.

(d) Except as provided by Section 2651.0021(e), an agent

applying for an initial license under this subchapter must

provide evidence that the agent and its management personnel have

successfully completed a professional training program that

complies with Section 2651.0021. The program must have been

completed within one year preceding the date of application.

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. 11, eff. September 1, 2009.

Sec. 2651.0021. PROFESSIONAL TRAINING PROGRAM. (a) The

commissioner shall adopt by rule a professional training program

for a title insurance agent and the management personnel of the

title insurance agent.

(b) The professional training program must be designed to

provide information regarding:

(1) the basic principles and coverages related to title

insurance;

(2) recent and prospective changes in those principles and

coverages;

(3) applicable rules and laws;

(4) proper conduct of the license holder's title insurance

business;

(5) accounting principles and practices and financial

responsibilities and practices relevant to title insurance; and

(6) the duties and responsibilities of a title insurance agent.

(c) Professional training program hours may be used to satisfy

the continuing education requirements established under Section

2651.204.

(d) A professional training program course must be offered by:

(1) a statewide title insurance association, statewide title

agents' association or professional association, or local chapter

of a statewide title insurance or title agents' association or

professional association;

(2) an accredited college or university;

(3) a career school or college as defined by Section 132.001,

Education Code;

(4) the State Bar of Texas;

(5) an educational publisher;

(6) a title insurance company authorized to engage in business

in this state;

(7) a company that owns one or more title insurance companies

authorized to engage in business in this state;

(8) a public school system in this state; or

(9) an individual accredited as an instructor by an entity

described by Subdivisions (1)-(8).

(e) An individual is exempt from the professional training

requirement of this section if the individual has held in this

state for at least five years a position as management personnel

with a title insurance agent, or a comparable position, as

determined under rules adopted by the commissioner.

Added by Acts 2009, 81st Leg., R.S., Ch.

1025, Sec. 12, eff. September 1, 2009.

Sec. 2651.003. LICENSE AND RENEWAL FEES. (a) The department

shall prescribe the license fee in an amount not to exceed $50.

(b) License fees, and renewal fees collected under this

subchapter, shall be deposited to the credit of the Texas

Department of Insurance operating account to be used by the

department to enforce this chapter and any other law of this

state that regulates title insurance agents.

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

2005.

Sec. 2651.004. LICENSE ISSUANCE. The department shall issue a

license if the department determines, based on the application

and the department's investigation, that the requirements of

Section 2651.002 are satisfied.

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

2005.

Sec. 2651.005. DUPLICATE LICENSE. (a) The department shall

collect in advance a fee from a title insurance agent who

requests a duplicate 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.

Sec. 2651.006. LICENSE TERM. Unless a system of staggered

license renewal is adopted under Section 4003.002, a license

issued under this subchapter expires on June 1 after the second

anniversary of the date of issuance.

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

2005.

Sec. 2651.007. LICENSE RENEWAL. (a) A title insurance agent

may renew a license by:

(1) filing a completed license renewal application form with the

department; and

(2) paying the nonrefundable license renewal fee to the

department.

(b) The department shall prescribe the license renewal

application form.

(c) The department shall prescribe the license renewal fee in an

amount not to exceed $50.

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

2005.

Sec. 2651.008. RECORDS OF AGENTS. The department shall maintain

a record of the name and address of each title insurance agent

licensed by the department in a manner that ensures that the

agents appointed by any company authorized to engage in the

business of title insurance in this state may be conveniently

ascertained and inspected by any person on request.

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

2005.

Sec. 2651.009. MULTIPLE APPOINTMENTS. (a) A licensed title

insurance agent may be appointed to represent additional title

insurance companies.

(b) Any additional title insurance company must notify the

department of the appointment in the manner prescribed by the

department. The agent must include with the notice a

nonrefundable fee for each additional appointment. The department

shall prescribe the fee in an amount not to exceed $16.

(c) The appointment is effective on the eighth day following the

date the department receives the completed notice of appointment

and the fee, unless the department rejects the appointment. If

the department rejects the appointment, the department shall

state in writing the reasons for rejection not later than the

seventh day after the date on which the department receives the

completed notice of appointment.

(d) A title insurance company may not permit an agent appointed

by the company to write, sign, or deliver title insurance until

the agent's appointment is effective.

(e) The appointment remains effective, without the necessity of

renewal, until the appointment:

(1) is terminated by the title insurance company as provided by

this section; or

(2) is otherwise terminated under this subchapter.

(f) A renewal license issued to an agent authorizes the agent to

represent and act for the title insurance companies for which the

agent holds appointments until the appointments are terminated,

and the agent is considered to be the agent of the appointing

companies for purposes of this subchapter.

(g) When a title insurance company terminates the appointment of

an agent, the company shall immediately file with the department

a statement that contains:

(1) the facts relating to the termination of the appointment;

and

(2) the effective date and reason for the termination.

(h) On receipt of the statement, the department shall terminate

the appointment of the agent to represent that title insurance

company in this state.

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

2005.

Sec. 2651.010. SUSPENSION OF LICENSE. The department shall

suspend the license of a title insurance agent during any period

in which the agent does not have a valid appointment. The

department shall end the suspension when the department receives

an acceptable notice of a valid appointment.

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

2005.

Sec. 2651.011. PRIVILEGED COMMUNICATIONS; FINANCIAL INFORMATION.

(a) Any information, including a document, record, or

statement, and including information provided to or received from

the commissioner under Subsection (b) or (c), or any other

information required or permitted to be made or disclosed to or

by the department under this subchapter, other than Section

2651.001, is not public information subject to Chapter 552,

Government Code, except to the extent described by Subsection

(b), and is a privileged communication and may not be disclosed

to the public except as evidence in an administrative hearing or

proceeding. This subsection does not apply to a document,

record, or statement required to be made or disclosed to the

department under Chapter 36.

(b) A title insurance company may provide information to the

commissioner about a financial matter that would reasonably call

into question the solvency of a title agent that the title

insurance company appointed. Each title insurance company shall

provide annually to the department a list of officers authorized

to provide to the department the information under this

subsection. Information provided under this subsection is not

subject to Chapter 552, Government Code, except that the

commissioner may release information that the commissioner

received under this subsection to a title insurance company that

has appointed, or that is considering appointing, the title

agent. The commissioner may also release information that the

commissioner received under this subsection to a title agent

under Section 2651.206, Insurance Code, if the information is

evidence on which an audit report or examination report relies.

A title insurance company that receives information under this

subsection may not release the information except under a

subpoena issued by a court of competent jurisdiction.

(c) Each title insurance agent shall provide the department, on

a quarterly basis, with a copy of the agent's quarterly

withholding tax report furnished by the agent to the United

States Internal Revenue Service. The title insurance agent must

also provide to the department proof of the payment of the tax.

An agent that does not have employees shall certify to the

department on a quarterly basis that there has not been a

material change in the agent's financial condition.

(d) The commissioner by rule may prescribe the types of

information under Subsections (b) and (c) that are privileged

under Subsection (a).

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. 13, eff. September 1, 2009.

For contingent effect of this section, see Subsection (j).

For expiration of Subsections (g) and (i), see Subsection (i).

Sec. 2651.012. UNENCUMBERED ASSETS. (a) In this section:

(1) "Principal office" means a principal office of the business

organization, unincorporated association, sole proprietorship, or

partnership in this state in which the decision makers for the

organization conduct the daily affairs of the organization. The

presence of an agency or representative does not establish a

principal office.

(2) "Unencumbered assets" means:

(A) cash or cash equivalents;

(B) liquid assets that have a readily determinable market value

and that do not have any lien against them;

(C) real estate, in excess of any encumbrances;

(D) investments, such as mutual funds, certificates of deposit,

and stocks and bonds;

(E) a surety bond, the form and content of which shall be

prescribed by the commissioner in accordance with this code;

(F) a deposit made in accordance with Section 2651.102; and

(G) a letter of credit that meets the requirements of Section

493.104(b)(2)(C).

(b) The unencumbered assets required under this section are

reserves for contingencies. The reserves must be deducted from

premiums for purposes of proceedings conducted under Subchapter

D, Chapter 2703. The reserves may only be spent or released:

(1) as permitted by the commissioner if the agent is declared

impaired;

(2) if the agent merges or consolidates with another agent who

maintains the amount of unencumbered assets that would be

required for the survivor of the merger or consolidation;

(3) if the agent surrenders the agent's license under Section

2651.201 and the rules adopted under that section; or

(4) if the agent is liquidated.

(c) Except as provided by Subsection (d), an agent must maintain

unencumbered assets with a market value in excess of liabilities,

exclusive of the value of abstract plants, in the following

amounts unless the commissioner establishes lesser amounts by

rule:

(1) if the agent maintains its principal office in a county with

a population of 10,000 or more but less than 50,000: $25,000;

(2) if the agent maintains its principal office in a county with

a population of 50,000 or more but less than 200,000: $50,000;

(3) if the agent maintains its principal office in a county with

a population of 200,000 or more but less than one million:

$100,000; and

(4) if the agent maintains its principal office in a county with

a population of one million or more: $150,000.

(d) Except as provided by the commissioner by rule, an agent

that maintains its principal office in a county with a population

of less than 10,000 is exempt from this section.

(e) An agent that maintains a principal office in more than one

county must meet the asset standards for the largest county for

which the agent will hold a license.

(f) An agent may elect to:

(1) maintain unencumbered assets as required by this section; or

(2) place a deposit with the department as authorized by Section

2652.102.

(g) An agent that holds a license on September 1, 2009, and that

has held the license for at least three years as of that date is

not required to comply with Subsection (c) on September 1, 2009,

but shall increase the unencumbered assets held by the agent, or

make and increase the required deposit, until the agent is in

compliance with the required capitalization amounts in accordance

with the schedule established under this subsection. The agent

must hold unencumbered assets, or make a deposit in an amount,

such that:

(1) if the agent has been licensed at least three years but less

than four years:

(A) the agent has at least 33 percent of the required

capitalization amount on September 1, 2010;

(B) the agent has at least 66 percent of the required

capitalization amount on September 1, 2011; and

(C) the agent has at least 100 percent of the required

capitalization amount on September 1, 2012;

(2) if the agent has been licensed at least four years but less

than five years:

(A) the agent has at least 25 percent of the required

capitalization amount on September 1, 2010;

(B) the agent has at least 50 percent of the required

capitalization amount on September 1, 2011;

(C) the agent has at least 75 percent of the required

capitalization amount on September 1, 2012; and

(D) the agent has at least 100 percent of the required

capitalization amount on September 1, 2013;

(3) if the agent has been licensed at least five years but less

than six years:

(A) the agent has at least 20 percent of the required

capitalization amount on September 1, 2010;

(B) the agent has at least 40 percent of the required

capitalization amount on September 1, 2011;

(C) the agent has at least 60 percent of the required

capitalization amount on September 1, 2012;

(D) the agent has at least 80 percent of the required

capitalization amount on September 1, 2013; and

(E) the agent has at least 100 percent of the required

capitalization amount on September 1, 2014;

(4) if the agent has been licensed at least six years but less

than seven years:

(A) the agent has at least 16.66 percent of the required

capitalization amount on September 1, 2010;

(B) the agent has at least 33.32 percent of the required

capitalization amount on September 1, 2011;

(C) the agent has at least 49.98 percent of the required

capitalization amount on September 1, 2012;

(D) the agent has at least 66.64 percent of the required

capitalization amount on September 1, 2013;

(E) the agent has at least 83.3 percent of the required

capitalization amount on September 1, 2014; and

(F) the agent has at least 100 percent of the required

capitalization amount on September 1, 2015;

(5) if the agent has been licensed at least seven years but less

than eight years:

(A) the agent has at least 14.29 percent of the required

capitalization amount on September 1, 2010;

(B) the agent has at least 28.58 percent of the required

capitalization amount on September 1, 2011;

(C) the agent has at least 42.87 percent of the required

capitalization amount on September 1, 2012;

(D) the agent has at least 57.16 percent of the required

capitalization amount on September 1, 2013;

(E) the agent has at least 71.45 percent of the required

capitalization amount on September 1, 2014;

(F) the agent has at least 85.74 percent of the required

capitalization amount on September 1, 2015; and

(G) the agent has at least 100 percent of the required

capitalization amount on September 1, 2016;

(6) if the agent has been licensed at least eight years but less

than nine years:

(A) the agent has at least 12.5 percent of the required

capitalization amount on September 1, 2010;

(B) the agent has at least 25 percent of the required

capitalization amount on September 1, 2011;

(C) the agent has at least 37.5 percent of the required

capitalization amount on September 1, 2012;

(D) the agent has at least 50 percent of the required

capitalization amount on September 1, 2013;

(E) the agent has at least 62.5 percent of the required

capitalization amount on September 1, 2014;

(F) the agent has at least 75 percent of the required

capitalization amount on September 1, 2015;

(G) the agent has at least 87.5 percent of the required

capitalization amount on September 1, 2016; and

(H) the agent has at least 100 percent of the required

capitalization amount on September 1, 2017; and

(7) if the agent has been licensed at least nine years:

(A) the agent has at least 11.11 percent of the required

capitalization amount on September 1, 2010;

(B) the agent has at least 22.22 percent of the required

capitalization amount on September 1, 2011;

(C) the agent has at least 33.33 percent of the required

capitalization amount on September 1, 2012;

(D) the agent has at least 44.44 percent of the required

capitalization amount on September 1, 2013;

(E) the agent has at least 55.55 percent of the required

capitalization amount on September 1, 2014;

(F) the agent has at least 66.66 percent of the required

capitalization amount on September 1, 2015;

(G) the agent has at least 77.77 percent of the required

capitalization amount on September 1, 2016;

(H) the agent has at least 88.88 percent of the required

capitalization amount on September 1, 2017; and

(I) the agent has at least 100 percent of the required

capitalization amount on September 1, 2018.

(h) If the agent has been licensed less than three years as of

September 1, 2009, the agent must have:

(1) at least 50 percent of the required capitalization amount

required under Subsection (c) on September 1, 2010; and

(2) 100 percent of that required capitalization amount on

September 1, 2011.

(i) This subsection and Subsection (g) expire September 2, 2018.

(j) Notwithstanding any other provision of this section, this

section takes effect only after the commissioner adopts the form,

content, and procedures for use of the surety bond authorized

under Subsection (a). The commissioner by rule shall establish

the procedures for making, filing, using, and paying for the

surety bond. Notwithstanding Subsections (g) and (h), the

commissioner by rule may extend the dates established under those

subsections as necessary to comply with this subsection.

Added by Acts 2009, 81st Leg., R.S., Ch.

1025, Sec. 14, eff. September 1, 2009.

Sec. 2651.013. DIVISION OF PREMIUM HELD IN TRUST; RULES. (a)

The funds held by a title insurance agent that are owed to a

title insurance company, another title insurance agent, or a

direct operation arising from a division of premium, whether as

determined under rules adopted by the commissioner or by

agreement among the parties, are considered to be held in trust

for the title insurance company, other title insurance agent, or

direct operation.

(b) This section does not require, and the commissioner may not

require by rule, that funds described by Subsection (a) be held

in a separate account subject to an external audit. This section

does not affect the department's or association's authority to

examine or audit a title agent or direct operation.

Added by Acts 2009, 81st Leg., R.S., Ch.

1025, Sec. 14, eff. September 1, 2009.

SUBCHAPTER B. DIRECT OPERATION LICENSE

Sec. 2651.051. LICENSE REQUIRED. (a) A title insurance company

may not own or lease and operate an abstract plant or participate

in a bona fide joint abstract plant operation in a county in this

state unless the company holds a license as a direct operation

issued by the department for that county.

(b) A title insurance company may not write, sign, or deliver

title insurance in a county in which the company operates an

abstract plant until the department has issued a direct operation

license to the company.

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

2005.

Sec. 2651.052. LICENSE APPLICATION. (a) Before a direct

operation license is issued to a title insurance company, the

company must file an application for a direct operation license

on forms provided by the department.

(b) The application must be:

(1) accompanied by a nonrefundable license fee; and

(2) signed and sworn to by the title insurance company.

(c) The completed application must state that:

(1) the title insurance company is a Texas corporation or a

foreign corporation holding a certificate of authority to insure

titles to real property in this state and meets the requirements

of this title; and

(2) the abstract plant to be licensed:

(A) complies with department requirements relating to abstract

plants; and

(B) has been approved by the department.

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

2005.

Sec. 2651.053. LICENSE AND RENEWAL FEES. (a) The department

shall prescribe the license fee in an amount not to exceed $50.

(b) License fees, and renewal fees collected under this

subchapter, shall be deposited to the credit of the Texas

Department of Insurance operating account to be used by the

department to enforce this chapter and the laws of this state

that regulate title insurance agents and title insurance

companies.

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

2005.

Sec. 2651.054. LICENSE TERM. Unless a system of staggered

license renewal is adopted, a license issued under this

subchapter expires on the second June 1 following the date of

issuance.

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

2005.

Sec. 2651.055. LICENSE RENEWAL. (a) On or before the

expiration date of a license issued under this subchapter, a

title insurance company may renew the license by:

(1) certifying to the department each county and address at

which the company operates the abstract plant for each license to

be renewed;

(2) filing a completed renewal application; and

(3) paying a nonrefundable license renewal fee for each license.

(b) The department shall provide the forms used under this

section.

(c) The department shall prescribe the license renewal fee in an

amount not to exceed $50.

(d) If a license has been expired for 90 days or less, the

license holder may renew the license by paying to the department

the required nonrefundable renewal fee and a nonrefundable fee

equal to one-half of the original license fee.

(e) If a license has been expired for more than 90 days, the

license may not be renewed.

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

2005.

Sec. 2651.056. CEASING OPERATION OF ABSTRACT PLANT; REQUEST FOR

LICENSE CANCELLATION. If a title insurance company ceases to

operate a licensed abstract plant, the company shall immediately

notify the department in writing and request cancellation of the

license.

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

2005.

Sec. 2651.057. AUTOMATIC TERMINATION OF LICENSES. If a title

insurance company surrenders the company's certificate of

authority or if the certificate of authority is revoked by the

department, all licenses of the company's abstract plants

automatically terminate.

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

2005.

Sec. 2651.058. RECORDS OF DIRECT OPERATIONS. The department

shall maintain a record of the county and address of each

location at which a title insurance company operates an abstract

plant in a manner that ensures that the abstract plants may be

conveniently ascertained and inspected by any person on request.

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

2005.

Sec. 2651.059. USE OF AGENTS NOT PROHIBITED. This subchapter

does not prohibit a title insurance company from issuing title

insurance through a licensed title insurance agent.

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

2005.

SUBCHAPTER C. BOND AND DEPOSIT REQUIREMENTS

Sec. 2651.101. BOND REQUIRED. (a) Each licensed title

insurance agent and direct operation shall make, file, and pay

for a surety bond payable to the department 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

for any pecuniary loss sustained by:

(1) any participant in an insured real property transaction

through an act of fraud, dishonesty, theft, embezzlement, or

wilful misapplication by a title insurance agent or direct

operation; or

(2) the department as a result of any administrative expense

incurred in a receivership of a title insurance agent or direct

operation.

(b) The amount of the bond must be the greater of:

(1) $10,000; or

(2) an amount equal to 10 percent of the gross premium written

by the title insurance agent or direct operation in accordance

with the latest statistical report to the department but not to

exceed $100,000.

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

2005.

Sec. 2651.102. ALTERNATIVE TO BOND. (a) Instead of the bond

required by Section 2651.101, a title insurance agent or direct

operation may deposit with the department:

(1) cash;

(2) irrevocable letters of credit issued by a financial

institution in this state that is insured by an agency of the

United States; or

(3) securities approved by the department.

(b) The cash, letters of credit, or securities deposited under

this section are subject to the conditions required for a bond

under Section 2651.101.

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

2005.

Sec. 2651.103. EXAMINATION OF LOSS COVERED BY BOND OR DEPOSIT.

(a) At any time it appears that a loss covered by a bond or

deposit has occurred, the department may require the title

insurance agent or direct operation 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 a

loss covered by the bond or deposit has occurred, the department

shall immediately notify the surety on the bond, if applicable,

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.

Sec. 2651.104. INVESTIGATION BY ATTORNEY GENERAL. (a) On

receipt of a written statement under Section 2651.103, the

attorney general shall investigate the charges and, on

determining that a loss covered by the bond or deposit has

occurred, shall enforce the liability by collecting against the

deposited 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 covered by the bond or deposit.

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

2005.

SUBCHAPTER D. ANNUAL AUDIT

Sec. 2651.151. ANNUAL AUDIT OF TRUST FUND ACCOUNTS: TITLE

INSURANCE AGENTS AND DIRECT OPERATIONS. (a) Each title

insurance agent and direct operation shall have an annual audit

made of trust fund accounts. The agent or direct operation shall

pay for the audit.

(b) Not later than the 90th day after the date of the end of the

agent's or direct operation's fiscal year, the agent or direct

operation shall send by certified mail, postage prepaid, to the

department one copy of the audit report with a transmittal

letter. The agent shall also send a copy of the audit report and

transmittal letter to each title insurance company that the agent

represents.

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

2005.

Sec. 2651.152. ANNUAL AUDIT OF TRUST FUND ACCOUNTS: TITLE

INSURANCE COMPANIES. (a) Each title insurance company shall

have an annual audit made of trust fund accounts for each county

in which it operates in its own name. The company shall pay for

the audit.

(b) Not later than the 90th day after the date of the end of the

title insurance company's fiscal year, the company shall send by

certified mail, postage prepaid, to the department one copy of

the audit report.

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

2005.

Sec. 2651.153. RULES. The commissioner by rule shall adopt:

(1) the standards for an audit; and

(2) the form of the required audit report.

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

2005.

Sec. 2651.154. PERFORMANCE OF AUDIT BY PUBLIC ACCOUNTANT. An

audit required under this subchapter must be performed by an

independent certified public accountant or licensed public

accountant, or a firm composed of either.

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

2005.

Sec. 2651.155. CONFIDENTIALITY OF AUDIT. The commissioner may

classify an audit report that is filed with the department by a

title insurance company under this subchapter as confidential and

privileged.

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

2005.

Sec. 2651.156. FAILURE TO RECEIVE AUDIT REPORT FROM AGENTS OR

DIRECT OPERATIONS. If a title insurance company fails to receive

an audit report from any of the company's agents or direct

operations in the specified period required by Section 2651.151,

the company shall report that failure to the department not later

than the 30th day after the expiration of the specified period.

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

2005.

Sec. 2651.157. ENFORCEMENT; HEARING. (a) After notice and

hearing, the department may revoke the license or certificate of

authority of a title insurance agent, direct operation, or title

insurance company that:

(1) fails to furnish an audit report in the time required; 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 agent, the direct

operation, or each title insurance company involved.

(c) At a hearing under this section, the agent, direct

operation, or 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.

Sec. 2651.158. CERTIFICATION OF UNENCUMBERED ASSETS. (a)

Unless the agent has elected to make a deposit with the

department under Section 2651.012(f), the annual audit of escrow

accounts must be accompanied by a certification by a certified

public accountant that the title insurance agent has the

appropriate unencumbered assets in excess of liabilities,

exclusive of the value of its abstract plants, as required by

Section 2651.012.

(b) The commissioner by rule shall establish:

(1) a procedure to be used to determine the value of categories

of assets; and

(2) the method by which the certification required by this

section must be made which shall not include an audit of

operating accounts.

Added by Acts 2009, 81st Leg., R.S., Ch.

1025, Sec. 15, eff. September 1, 2009.

SUBCHAPTER E. GENERAL REGULATION OF TITLE INSURANCE AGENTS AND

DIRECT OPERATIONS

Sec. 2651.201. LICENSE SURRENDER OR FORFEITURE. (a) A title

insurance agent or direct operation may voluntarily surrender at

any time a license issued under this chapter by giving notice to:

(1) the department; and

(2) the affected title insurance company.

(b) A title insurance agent or direct operation that terminates

the agency contract with a title insurance company automatically

forfeits the license under that company.

(c) A surrender or forfeiture of a 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.

Sec. 2651.202. TRUST FUND ACCOUNT DISBURSEMENTS. (a) A title

insurance company, title insurance agent, or direct operation may

not disburse funds from a trust fund account until good funds

related to the transaction have been received and deposited in

the account in amounts sufficient to fund any disbursements from

the transaction.

(b) A title insurance company, title insurance agent, or direct

operation is not liable for a violation of this section if the

violation:

(1) was not intentional; and

(2) resulted from a bona fide error despite the maintenance of

procedures reasonably adopted to avoid the error.

(c) The commissioner shall adopt rules and definitions to

implement this section.

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

2005.

Sec. 2651.203. DISCLOSURE OF OWNERSHIP AND PREMIUM INFORMATION.

(a) A title insurance agent who receives a portion of a premium

shall disclose to each purchaser of a title insurance policy or

other title insurance form the following:

(1) each shareholder, owner, or partner owning or controlling at

least one percent of the agent;

(2) each shareholder, owner, or partner owning or controlling at

least 10 percent of an entity that owns or controls at least one

percent of the agent;

(3) each person who is not a full-time employee of the agent and

who receives a portion of the premium for services performed on

behalf of the agent in connection with the issuance of a title

insurance form; and

(4) the amount of premium that a person disclosed in Subdivision

(3) receives.

(b) The department shall prescribe the form of the disclosure

required by this section.

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

2005.

Sec. 2651.204. CONTINUING EDUCATION. (a) To protect the public

and to preserve and improve the competence of license holders,

the department shall require as a condition of holding a title

insurance agent license that the license holder enroll in and

attend or teach continuing education consisting of class

instruction, lectures, seminars, or other forms of education

approved by the department for title insurance agents.

(b) The department shall prescribe the required number of hours

of continuing education, not to exceed 15 hours in each two-year

license period.

(c) Continuing education instruction must be designed to refresh

the license holder's understanding of:

(1) basic principles and coverages relating to title insurance;

(2) recent and prospective changes in those principles and

coverages;

(3) applicable rules of the commissioner and laws;

(4) the proper conduct of the license holder's business; and

(5) the duties and responsibilities of the license holder.

(d) The department may permit a license holder to complete an

equivalent course of study and instruction by mail if, because of

the remote location of the license holder's residence or

business, the license holder is unable to attend educational

sessions with reasonable convenience.

(e) On written request by the license holder, the department may

extend the time for the license holder to comply with the

requirements of this section or may exempt the license holder

from all or part of the requirements for a license period if the

department determines that the license holder is unable to comply

with the requirements because of illness, medical disability, or

another extenuating circumstance beyond the control of the

license holder. The commissioner shall prescribe the criteria for

an extension or exemption by rule.

(f) The commissioner shall adopt rules to administer this

section.

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

2005.

Sec. 2651.205. TITLE AGENT RECORDS. (a) A landlord or storage

facility, including electronic storage, that accepts possession

of an agent's guaranty file or other records takes possession

subject to:

(1) the right of access of the title insurance company involved

in the transaction that the file documents, during customary

business hours, for the purpose of copying the guaranty file; and

(2) the obligation to maintain the confidentiality of nonpublic

information in the title insurance agent's records according to

state and federal laws that govern the title insurance agent.

(b) If the title insurance agent has been designated impaired,

the Texas Title Insurance Guaranty Association has the right to

access the guaranty files and other records of the title

insurance agent, including electronic records, for 60 days from

the date of impairment, during customary business hours, for

purposes of copying those records.

(c) Except for the right of access granted under Subsections (a)

and (b), a lien created in favor of the landlord by contract or

otherwise is not impaired.

(d) For purposes of this section, "title insurance agent"

includes an agent owned wholly or partly by a title insurance

company and includes a direct operation.

Added by Acts 2009, 81st Leg., R.S., Ch.

1025, Sec. 16, eff. September 1, 2009.

Sec. 2651.206. EXAMINATION REPORTS. (a) An audit, review, or

examination conducted under this chapter or Chapter 2602 must be

conducted in accordance with rules adopted by the commissioner.

The rules must provide:

(1) that before a report from an examination, review, or audit

becomes final, the department will furnish to the title agent or

direct operation a copy of the report and any evidence on which

the report relies;

(2) a reasonable period of not less than 10 days after the title

agent or direct operation receives the report and evidence from

the department for the title agent or direct operation to

respond;

(3) an opportunity for an appeal under a process similar to the

process under Title 28, Part 1, Chapter 7, Subchapter A, Texas

Administrative Code; and

(4) procedures to ensure that the report and any evidence

regarding the report remain confidential and are transmitted only

to designated representatives of the title agent or direct

operation.

(b) The commissioner shall furnish the title agent or direct

operation with a draft of the report and a copy of any evidence

not later than the 10th day before the scheduled date of a

meeting requested by the department regarding a report.

(c) This section does not require the department to turn over

work papers. For purposes of this subsection, work papers are

the records of an auditor or examiner of the procedures followed,

the tests performed, the information obtained, and the

conclusions reached that are pertinent to the audit or

examination. Work papers include work programs, analyses,

memoranda, letters of confirmation and representation, abstracts

of company documents and schedules, and commentaries prepared or

obtained by the auditor or examiner that support the opinions of

the auditor or examiner.

Added by Acts 2009, 81st Leg., R.S., Ch.

1025, Sec. 16, eff. September 1, 2009.

SUBCHAPTER F. TITLE INSURANCE COMPANY POWERS AND DUTIES REGARDING

TITLE INSURANCE AGENTS

Sec. 2651.251. EXAMINATION OF TRUST FUND ACCOUNTS BY TITLE

INSURANCE COMPANY. (a) A title insurance company may examine,

at any time, the trust fund accounts and related records of the

company's title insurance agents through the company's examiners

or auditors or through independent certified public accountants

commissioned by the company.

(b) The title insurance company shall pay for each examination.

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

2005.

Sec. 2651.252. SPECIAL REPORTS. A title insurance company may

require special reports from the company's title insurance agents

regarding any of its transactions.

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

2005.

Sec. 2651.253. AUDIT OF UNUSED FORMS. (a) A title insurance

company shall periodically audit the unused forms in the

possession of each of the company' s title insurance agents to

determine that all used forms have been reported to the company.

(b) A title insurance company shall conduct an audit required by

this section at least once every two years.

(c) A report of each audit conducted under this section shall be

made to the department.

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

2005.

SUBCHAPTER G. LICENSE DENIAL AND DISCIPLINARY ACTION

Sec. 2651.301. GROUNDS FOR LICENSE DENIAL OR DISCIPLINARY

ACTION. The department may deny an application for a license or

discipline a title insurance agent or direct operation under

Sections 4005.102, 4005.103, and 4005.104 if the department

determines that the applicant or license holder has:

(1) wilfully violated this title;

(2) intentionally made a material misstatement in the license

application;

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

misrepresentation;

(4) misappropriated or converted to the applicant's or license

holder's own use or illegally withheld money belonging to a title

insurance company, an insured, or another person;

(5) been guilty of fraudulent or dishonest practices;

(6) materially misrepresented the terms and conditions of a

title insurance policy or contract; or

(7) 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.

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

2005.

Sec. 2651.302. 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 license as a title insurance agent or direct operation

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.