CHAPTER 2703. POLICY FORMS AND PREMIUM RATES - Texas Statutes

INSURANCE CODE

TITLE 11. TITLE INSURANCE

SUBTITLE E. THE BUSINESS OF TITLE INSURANCE

CHAPTER 2703. POLICY FORMS AND PREMIUM RATES

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 2703.001. COMPLIANCE WITH TITLE AND RULES. (a) This

section applies to a corporation organized under this title, a

foreign corporation, and, to the extent that the corporation is

engaged in the business of title insurance, a corporation

organized under another law, including:

(1) Subdivision 57, Article 1302, Revised Statutes, before

repeal of that statute; and

(2) Chapter 861.

(b) A corporation operates in this state under the control and

supervision of the commissioner and under uniform rules adopted

by the commissioner relating to:

(1) forms of policies and underwriting contracts;

(2) premiums for those policies and contracts; and

(3) underwriting standards and practices.

(c) With respect to real property located in this state, a

corporation may not issue any kind of title insurance coverage,

any kind of guarantee, or reinsurance of a risk assumed under a

title insurance policy, except as provided by Section

2551.305(a), unless the corporation is authorized to engage in

the business of title insurance under this title and otherwise

complies with this title. In engaging in the business of title

insurance with respect to real property located in this state,

the corporation shall comply with this title and rules described

by Subsection (b), including when:

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

underwriting contract;

(2) reinsuring any portion of a risk assumed under a title

insurance policy; and

(3) deleting a title insurance policy exclusion.

(d) Title insurance coverage, reinsurance, or a guarantee issued

in violation of Subsection (c) is invalid.

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

2005.

Sec. 2703.002. USE OF FORMS IN GENERAL. A title insurance

company or title insurance agent may not use a form required

under this title to be prescribed or approved until the

commissioner has prescribed or approved the form.

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

2005.

Sec. 2703.003. PAYMENT OF PREMIUMS. The premium for a title

insurance policy or for another form prescribed or approved by

the commissioner shall be paid in the due and ordinary course of

business.

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

2005.

SUBCHAPTER B. POLICY PROVISIONS

Sec. 2703.051. CERTAIN PROVISIONS REQUIRED. A title insurance

policy delivered or issued for delivery in this state to insure

an owner of real property must include certain provisions, the

form and content of which shall be prescribed by the

commissioner, in accordance with this subchapter.

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

2005.

Sec. 2703.052. DUTY OF TITLE INSURANCE COMPANY. (a) On a

report to a title insurance company made by an insured after a

title insurance policy has been issued that a lien, encumbrance,

or title defect exists that is not excepted under the policy or

otherwise excluded from coverage, the company shall promptly

investigate to determine whether the lien or encumbrance is valid

and not barred by statute or other law.

(b) A title insurance company that concludes that a valid lien

or encumbrance that is not barred by statute or other law exists

or that a title defect exists shall:

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

to the property;

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

(3) reinsure at current value the title to the property without

making exception to the lien, encumbrance, or defect or indemnify

another insurer for reinsuring the title without making exception

to the lien, encumbrance, or defect;

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

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

subsection.

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

2005.

Sec. 2703.053. ESTABLISHMENT OF STANDARDS AND SCHEDULES. The

commissioner by rule shall establish standards and time schedules

for implementing and handling claims by title insurance companies

in accordance with this subchapter.

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

2005.

Sec. 2703.054. AUTHORITY OF COMMISSIONER IN IMPLEMENTING

SUBCHAPTER. (a) The commissioner may adopt, by amendment to an

owner title insurance policy or by separate endorsement to an

owner title insurance policy, language to implement this

subchapter in a manner consistent with the terms, provisions,

conditions, and stipulations of the policy or the exceptions to

coverage contained in the schedules to the policy.

(b) This subchapter does not prohibit the commissioner from

adopting for use in this state one or more policies in a

simplified, generally more understandable, and usable form.

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

2005.

SUBCHAPTER C. POLICY FORMS FOR RESIDENTIAL REAL PROPERTY

Sec. 2703.101. POLICY FORMS FOR RESIDENTIAL REAL PROPERTY. (a)

The commissioner shall prescribe an owner title insurance policy

form to be issued in connection with a transaction involving

residential real property in this state.

(b) A title insurance company or title insurance agent shall use

the form prescribed by the commissioner in issuing to an

individual an owner title insurance policy relating to

residential real property in this state.

(c) Unless authorized by rule adopted by the commissioner, an

insurer may not enter into a contract or other agreement

concerning an individual title insurance policy if the contract

or other agreement is not expressed in the policy. A contract or

agreement prohibited by this subsection is void.

(d) An endorsement prescribed by the commissioner may be

attached to the title insurance policy form as authorized by rule

adopted by the commissioner.

(e) The commissioner may not prescribe an owner title insurance

policy form for residential real property or an endorsement to

the policy if the policy form or endorsement is not written in

plain language. For purposes of this subsection, a policy form or

endorsement is written in plain language if it achieves the

minimum score established by the commissioner on the Flesch

reading ease test or an equivalent test selected by the

commissioner or, at the commissioner's option, if it conforms to

the language requirements in a National Association of Insurance

Commissioners model act relating to plain language. This

subsection does not apply to policy language required by state or

federal law.

(f) For an owner title insurance policy on residential real

property that is issued to an individual, the commissioner may

adopt coverages that insure against ad valorem taxes, including

penalties and interest, to be paid with respect to the property

for a previous tax year:

(1) that are delinquent on the effective date of the policy

because of sale, diversion, or change of use, unless excluded

because the insured has actual knowledge of the delinquent taxes;

or

(2) that result from an exemption granted to a previous owner of

the property under Section 11.13, Tax Code, or from an

improvement not assessed for a previous tax year, unless excluded

because the insured has actual knowledge of the taxes.

(g) For an owner's title insurance policy on residential real

property that is issued to an individual, the commissioner shall

adopt terms that provide for continuation of coverage subject to

rights and defenses against the original named insured for:

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

the original named insured's death;

(2) the original named insured's spouse who receives title in a

dissolution of marriage with the original named insured;

(3) the trustee or successor of a trust established by the

original named insured to whom the original named insured

transfers title after the date of policy; or

(4) the beneficiaries of a trust described by Subdivision (3) on

the death of the original named insured.

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

2005.

Amended by:

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

985, Sec. 1, eff. September 1, 2009.

SUBCHAPTER D. FIXING AND PROMULGATING PREMIUM RATES

Sec. 2703.151. FIXING AND PROMULGATING PREMIUM RATES. (a)

Except as provided by Subsection (b), the commissioner shall fix

and promulgate the premium rates to be charged by a title

insurance company or by a title insurance agent for title

insurance policies or for other forms prescribed or approved by

the commissioner.

(b) The commissioner may not fix or promulgate the premium rates

for reinsurance between title insurance companies. Title

insurance companies may establish the premium rates in amounts to

which the companies agree.

(c) Except for a premium charged for reinsurance, a premium may

not be charged for a title insurance policy or for another

prescribed or approved form at a rate different than the rate

fixed and promulgated by the commissioner.

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

2005.

Sec. 2703.152. FACTORS CONSIDERED IN FIXING PREMIUM RATES. (a)

In fixing premium rates, the commissioner shall consider all

relevant income and expenses of title insurance companies and

title insurance agents attributable to engaging in the business

of title insurance in this state.

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

(1) reasonable as to the public; and

(2) nonconfiscatory as to title insurance companies and title

insurance agents.

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

2005.

Sec. 2703.153. COLLECTION OF DATA FOR FIXING PREMIUM RATES;

ANNUAL STATISTICAL REPORT. (a) Each title insurance company and

title insurance agent engaged in the business of title insurance

in this state shall annually submit to the department, as

required by the department to collect data to use to fix premium

rates, a statistical report containing information relating to:

(1) loss experience;

(2) expense of operation; and

(3) other material matters.

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

the department.

(c) If the department requires a title insurance company or

title insurance agent to include new or different information in

the statistical report, that information may be considered by the

commissioner in fixing premium rates if the information collected

is reasonably credible for the purposes for which the information

is to be used.

(d) A title insurance company or a title insurance agent

aggrieved by a department requirement concerning the submission

of information may bring a suit in a district court in Travis

County alleging that the request for information:

(1) is unduly burdensome; or

(2) is not a request for information material to fixing and

promulgating premium rates or another matter that may be the

subject of the biennial hearing and is not a request reasonably

designed to lead to the discovery of that information.

(e) On filing of a suit under Subsection (d), the requirement

that the title insurance company or title insurance agent

bringing the suit comply with the request for the information is

abated as to that title insurance company or title insurance

agent. The district court may enter an order requiring the title

insurance company or title insurance agent to comply with the

request for information subject to the limitations, if any,

imposed by the court.

(f) A title insurance company or title insurance agent must

bring suit under Subsection (d) not later than the 30th day after

the date the company or agent receives the request for

information from the department.

(g) This section may not be construed to limit the department's

authority to request information under Section 38.001 or other

applicable provisions of this code.

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

2005.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

930, Sec. 1, eff. September 1, 2007.

SUBCHAPTER E. PROCEDURES REGARDING PREMIUM RATES, POLICY FORMS,

AND OTHER RELATED MATTERS

Sec. 2703.201. HEARING REQUIRED FOR FIXING PREMIUM RATE. Before

a premium rate may be fixed and a premium charged, the department

must provide reasonable notice and a hearing must be afforded to

title insurance companies, title insurance agents, and the

public.

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

2005.

Sec. 2703.202. HEARING REQUIRED FOR CHANGE IN PREMIUM RATE. (a)

A premium rate previously fixed by the commissioner may not be

changed until after the commissioner holds a public hearing.

(b) At the request of a title insurance company or the office of

public insurance counsel, the commissioner shall order a public

hearing to consider changing a premium rate.

(c) Except as provided by Subsection (d), a public hearing held

under Subsection (a) or under Section 2703.206 shall be conducted

by the commissioner as a rulemaking hearing under Subchapter B,

Chapter 2001, Government Code.

(d) Notwithstanding Subsection (c), at the request of a title

insurance company or the public insurance counsel, a public

hearing held under Subsection (a) or under Section 2703.206 must

be conducted by the commissioner as a contested case hearing

under Subchapters C through H and Subchapter Z, Chapter 2001,

Government Code.

(e) Information received or requested by the commissioner as

part of an individual audit or examination under Chapters 2602

and 2651 may not be used for rate setting under Subchapter D,

Chapter 2703. Nothing in this section prohibits a party from

conducting discovery in a ratemaking or other proceeding or

producing other information requested by the department, or

verifying the data reported under a statistical plan or report

promulgated by the commissioner.

(f) Subsections (c) through (e) apply only to a public hearing

held on or after January 1, 2009.

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

2005.

Amended by:

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

1025, Sec. 17, eff. September 1, 2009.

Sec. 2703.203. BIENNIAL HEARING. The commissioner shall hold a

biennial public hearing not earlier than July 1 of each

even-numbered year to consider adoption of premium rates and

other matters relating to regulating the business of title

insurance that an association, title insurance company, title

insurance agent, or member of the public admitted as a party

under Section 2703.204 requests to be considered or that the

commissioner determines necessary to consider.

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

2005.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

930, Sec. 1, eff. September 1, 2007.

Sec. 2703.204. ADMISSION AS PARTY TO BIENNIAL HEARING. (a)

Subject to this section, an individual or association or other

entity recommending adoption of a premium rate or another matter

relating to regulating the business of title insurance shall be

admitted as a party to the biennial hearing.

(b) A party to the ratemaking phase of the biennial hearing may

request that the commissioner remove any other party to the

ratemaking phase of the hearing on the grounds that the other

party does not have a substantial interest in title insurance. A

decision of the commission to deny or grant the request is final

and subject to appeal in accordance with Section 36.202.

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

2005.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

930, Sec. 2, eff. September 1, 2007.

Sec. 2703.205. PHASES OF BIENNIAL HEARING. (a) The biennial

hearing consists of:

(1) a rulemaking phase to consider rules, forms, endorsements,

and related matters that do not have rate implications; and

(2) a ratemaking phase to consider fixing of premium rates and

other matters that have rate implications.

(b) The commissioner shall certify which matters have rate

implications to be considered in the ratemaking phase of the

hearing.

(c) Except as provided by Subsection (d), the commissioner shall

conduct both phases of the hearing.

(d) At the direction of the commissioner or at the written

request of an association or other entity recommending adoption

of a premium rate and seeking admission as a party to the

ratemaking phase of the hearing, the State Office of

Administrative Hearings shall conduct the ratemaking phase of the

hearing in accordance with Chapter 40. A request under this

subsection must be made at the time the association or entity

seeks to be admitted as a party to the hearing but may not be

made later than the 10th day after the date notice of the hearing

is provided under Section 2703.207.

(e) The ratemaking phase of the hearing shall be conducted as a

contested case in accordance with Chapter 2001, Government Code.

(f) A party's presentation of relevant, admissible oral

testimony may not be limited.

(g) Each matter in each phase of the hearing shall be considered

by the commissioner and decisions on the matters made in an open

meeting.

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

2005.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

930, Sec. 3, eff. September 1, 2007.

Sec. 2703.206. COMMISSIONER AUTHORITY TO HOLD HEARINGS AS

NECESSARY. At any time, the commissioner may order a public

hearing to consider adoption of premium rates and other matters

relating to regulating the business of title insurance as the

commissioner determines necessary or proper.

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

2005.

Sec. 2703.207. NOTICE OF CERTAIN HEARINGS. Not later than the

60th day before the date of a hearing under Section 2703.202,

2703.203, or 2703.206, notice of the hearing and of each item to

be considered at the hearing shall be:

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

insurance agents; and

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

concerning the hearing.

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

2005.

Sec. 2703.208. ADDITIONS OR AMENDMENTS TO MANUAL. (a) An

addition or amendment to the Basic Manual of Rules, Rates, and

Forms for the Writing of Title Insurance in the State of Texas

may be proposed and adopted by reference by publishing notice of

the proposal or adoption by reference in the Texas Register.

(b) Notice under this section must include:

(1) a brief summary of the substance of the matter to be added

or amended; and

(2) a statement that the full text of the matter is available

for review in the office of the chief clerk of the department.

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

2005.