CHAPTER 557. INSURED PROPERTY SUBJECT TO SECURITY INTEREST - Texas Statutes

INSURANCE CODE

TITLE 5. PROTECTION OF CONSUMER INTERESTS

SUBTITLE C. DECEPTIVE, UNFAIR, AND PROHIBITED PRACTICES

CHAPTER 557. INSURED PROPERTY SUBJECT TO SECURITY INTEREST

SUBCHAPTER A. INSURANCE PROCEEDS HELD BY LENDER PENDING REPAIR OF

RESIDENTIAL REAL PROPERTY

Sec. 557.001. DEFINITIONS. In this subchapter:

(1) "Lender" means a person holding a mortgage, lien, deed of

trust, or other security interest in property.

(2) "Residential real property" means:

(A) a single-family house;

(B) a duplex, triplex, or quadraplex; or

(C) a unit in a multi-unit residential structure in which title

to an individual unit is transferred to the owner of the unit

under a condominium or cooperative system.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 557.002. NOTIFICATION BY LENDER TO INSURED CONCERNING

INSURANCE PROCEEDS. (a) If a claim under an insurance policy

for damage to residential real property is paid to the insured

and a lender, and the lender holds all or part of the proceeds

from the insurance claim payment pending completion of all or

part of the repairs to the property, the lender shall notify the

insured of each requirement with which the insured must comply

for the lender to release the insurance proceeds.

(b) The notice required under this section must be provided not

later than the 10th day after the date the lender receives

payment of the insurance proceeds.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 557.003. LENDER'S RELEASE OR REFUSAL TO RELEASE INSURANCE

PROCEEDS. Not later than the 10th day after the date a lender

receives from the insured a request for release of all or part of

the insurance proceeds held by the lender, the lender shall:

(1) if the lender has received sufficient evidence of the

insured's compliance with the requirements specified by the

lender under Section 557.002 for release of the proceeds, release

to the insured, as requested, all or part of the proceeds; or

(2) provide notice to the insured that explains specifically:

(A) the reason for the lender's refusal to release the proceeds

to the insured; and

(B) each requirement with which the insured must comply for the

lender to release the proceeds.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 557.004. PAYMENT OF INTEREST; RATE. A lender who fails to

provide notice as required by Section 557.002 or 557.003 or to

release insurance proceeds as required by Section 557.003 shall

pay to the insured interest at the rate of 10 percent a year on

the proceeds held by the lender.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 557.005. ACCRUAL OF INTEREST. (a) If a lender fails to

provide notice as required by Section 557.002 or 557.003,

interest begins to accrue on the date the lender received the

insurance proceeds.

(b) If a lender fails to release insurance proceeds as required

by Section 557.003, interest begins to accrue on the date the

lender receives sufficient evidence of the insured's compliance

with the requirements specified by the lender under Section

557.002 or 557.003 for release of the proceeds.

(c) Interest stops accruing on the date the lender complies with

Section 557.002 or 557.003, as applicable.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 557.006. INTEREST NOT REQUIRED ON INSURANCE PROCEEDS

APPLIED TO REDUCE NOTE. A lender is not required to pay interest

on insurance proceeds applied, in accordance with the terms and

conditions of a deed of trust or other security agreement, to

reduce a note.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

SUBCHAPTER B. LIENHOLDER APPROVAL OF INSURANCE CLAIM PAYMENT

RELATING TO PERSONAL PROPERTY

Sec. 557.051. LIENHOLDER APPROVAL OF PAYMENT. If payment of an

insurance claim relating to personal property requires the

endorsement of a check or draft by a holder of a lien on the

property or otherwise requires approval of the lienholder, not

later than the 14th business day after the date the lienholder

receives a request for the endorsement or other approval, the

lienholder shall provide:

(1) the endorsement or approval; or

(2) a written statement of the reason for denial of the

endorsement or approval to the person who requested the

endorsement or approval.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 557.052. CIVIL PENALTY. (a) A lienholder who violates

Section 557.051 is liable for a civil penalty not to exceed $500

for each violation.

(b) The attorney general may bring an action to collect a civil

penalty under this section.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.