Dallas insurance attorneys need to know a few of the regulations regarding title insurance policies.
The title insurance business in Texas is almost completely regulated by the Texas Department of Insurance, and policies may not be issued except as provided by Title 11 of the Texas Insurance Code. This section of the Texas Insurance Code is also known as the “Texas Title Insurance Act.”
Any person, business, corporation, whether in Texas or outside of Texas, which engages in providing title insurance, and their agents, must operate under the control and supervision of the rules promulgated by the Commissioner of the Texas Department of Insurance. This rule is found in Section 2703.001.
One strange rule regulating the sale of title insurance in Texas is Section 2502.001. This rule says any company that sells title insurance in Texas, may not sell other types of insurance.
The Commissioner of the Texas Department of Insurance oversees and regulates policy forms, underwriting contracts and premiums, and underwriting standards and practices. He and the Department have broad power in enforcing the rules and regulations. The Department also publishes rules regarding title insurance that can be found on their web-site.
Failure to strictly follow the rules regulating title insurance can result in the revocation of their license to provide title insurance.
The companies that sell title insurance have pretty strict financial regulations placed on them. These include:
1) Capital and Surplus Minimums. All title insurance companies must have a paid up capital of at least $1 million and a surplus of $1 million.
2) Mandatory Reserve. Title insurance companies must establish and maintain an unearned premium reserve of up to $100,000, to be composed of unearned portions of the original premium. The purpose of the reserve is to protect title insurance contract holders in the event of insolvency or dissolution of the insurance company. The act also provides for rules and regulations governing the method of establishment and maintenance of the reserve.
3) Mandatory Deposit. Title insurance companies must keep 25% of the companies’ capital, up to $100,000, on deposit with the State Treasury to provide payment for obligations the insurance company incurs unrelated to title insurance.
4) Claims Reserves Required by Statute. The act requires title insurance companies to estimate the value of unpaid losses and or potential defense costs for each presented claim and to maintain a claim reserve for these estimated costs.
5) Investments Regulated. The Act also sets guidelines for permissible investments for title insurance companies.
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