2005 Texas Insurance Code CHAPTER 2703. POLICY FORMS AND PREMIUM RATES


INSURANCE CODE
CHAPTER 2703. POLICY FORMS AND PREMIUM RATES
SUBCHAPTER A. GENERAL PROVISIONS
§ 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, § 6, eff. April 1, 2005. § 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, § 6, eff. April 1, 2005. § 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, § 6, eff. April 1, 2005.
SUBCHAPTER B. POLICY PROVISIONS
§ 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, § 6, eff. April 1, 2005. § 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, § 6, eff. April 1, 2005. § 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, § 6, eff. April 1, 2005. § 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, § 6, eff. April 1, 2005.
SUBCHAPTER C. POLICY FORMS FOR RESIDENTIAL REAL PROPERTY
§ 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. Added by Acts 2003, 78th Leg., ch. 1274, § 6, eff. April 1, 2005.
SUBCHAPTER D. FIXING AND PROMULGATING PREMIUM RATES
§ 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, § 6, eff. April 1, 2005. § 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, § 6, eff. April 1, 2005. § 2703.153. COLLECTION OF DATA FOR FIXING PREMIUM RATES. (a) Each title insurance company and title insurance agent engaged in the business of title insurance in this state shall submit to the department, as required by the department to collect data to use to fix premium rates, all 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. Added by Acts 2003, 78th Leg., ch. 1274, § 6, eff. April 1, 2005.
SUBCHAPTER E. PROCEDURES REGARDING PREMIUM RATES, POLICY FORMS, AND OTHER RELATED MATTERS
§ 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, § 6, eff. April 1, 2005. § 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. Added by Acts 2003, 78th Leg., ch. 1274, § 6, eff. April 1, 2005. § 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 requests to be considered or that the commissioner determines necessary to consider. Added by Acts 2003, 78th Leg., ch. 1274, § 6, eff. April 1, 2005. § 2703.204. ADMISSION AS PARTY TO BIENNIAL HEARING. 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. Added by Acts 2003, 78th Leg., ch. 1274, § 6, eff. April 1, 2005. § 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 a person 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 a person 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, § 6, eff. April 1, 2005. § 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, § 6, eff. April 1, 2005. § 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, § 6, eff. April 1, 2005. § 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, § 6, eff. April 1, 2005.

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