2005 Texas Insurance Code CHAPTER 2502. PROHIBITED CONDUCT

INSURANCE CODE

CHAPTER 2502. PROHIBITED CONDUCT

SUBCHAPTER A. PROHIBITED CONDUCT IN GENERAL


	§ 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, § 6, eff. April 1, 2005.          


	§ 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, § 6, eff. April 1, 2005.          


	§ 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, § 6, eff. April 1, 2005.          


	§ 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, § 6, eff. April 1, 2005.          


	§ 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, § 6, eff. April 1, 2005.          

SUBCHAPTER B. REBATES AND DISCOUNTS


	§ 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, § 6, eff. April 1, 2005.          


	§ 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, § 6, eff. April 1, 2005.          


	§ 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, § 6, eff. April 1, 2005.          


	§ 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, § 6, eff. April 1, 2005.          


	§ 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, § 6, eff. April 1, 2005.  
Amended by Acts 2005, 79th Leg., ch. 631, § 7, eff. Sept. 1, 
2005.


	§ 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, § 6, eff. April 1, 2005.