INSURANCE CODE
CHAPTER 549. PROHIBITED PRACTICES RELATING TO PROPERTY INSURANCE
SUBCHAPTER A. GENERAL PROVISIONS
§ 549.001. DEFINITIONS. In this chapter:
(1) "Borrower" means an individual, partnership,
corporation, association, or other entity who has or acquires a
legal or equitable interest in real or personal property that is or
becomes subject to a mortgage, lien, security agreement, deed of
trust, or other security instrument.
(2) "Insurance binder" means a contract that provides
insurance coverage pending the issuance of an original insurance
policy that will be issued on or before the 30th day after the date
the insurance binder is issued.
(3) "Lender" means an individual, partnership,
corporation, association, or other entity, agent, loan agent,
servicing agent, or loan or mortgage broker who lends money and
receives or otherwise acquires a mortgage, a lien, a deed of trust,
or any other security interest in or on any real or personal
property as security for the loan.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 549.002. INAPPLICABILITY OF CHAPTER TO TITLE
INSURANCE. This chapter does not apply to title insurance.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 549.003. CANCELLATION OF POLICY AFTER FORECLOSURE
AUTHORIZED. In the event of a foreclosure under a deed of trust,
the lender may cancel an insurance policy covering the foreclosed
property and is entitled to any unearned premiums from the policy if
the lender:
(1) credits the amount of the unearned premiums
against any deficiency owed by the borrower; and
(2) delivers to the borrower any excess unearned
premiums not credited against a deficiency under Subdivision (1).
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
SUBCHAPTER B. PROHIBITED PRACTICES
§ 549.051. FEES FOR SUBSTITUTION OR REPLACEMENT OF
POLICY. (a) A lender may not require a fee in an amount greater
than $10 for the substitution by the borrower of a new insurance
policy for another insurance policy in effect, or require a fee for
the furnishing by the borrower of a new insurance policy to replace
an existing insurance policy on termination of the existing policy,
if the new insurance policy is provided through an insurer
authorized to engage in business in this state.
(b) On the sale or transfer of the lender's ownership
interest in real or personal property, the lender is subject to the
payment of a substitution fee as described by Subsection (a) and may
not, directly or indirectly, charge the borrower for the
substitution fee.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 549.052. REQUIRING POLICY FROM PARTICULAR SOURCE. A
lender may not directly or indirectly require as a condition of the
financing or lending of money or the renewal or extension of
financing or lending of money that the purchaser or borrower or the
successors of the purchaser or borrower obtain an insurance policy
or the renewal or extension of an insurance policy covering the
property involved in the transaction from or through:
(1) a particular agent, insurer, or other person; or
(2) a particular type or class of agent, insurer, or
other person.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 549.053. USE OF POLICY INFORMATION. (a) Except as
otherwise provided by this section, a lender may not:
(1) use or permit the use of any information taken from
an insurance policy insuring the borrower's property for the
purpose of soliciting insurance business from the borrower; or
(2) make information taken from an insurance policy
insuring the borrower's property available to any other person for
any purpose.
(b) Subsection (a) does not:
(1) apply if the borrower provides the lender with
specific written authority permitting or directing the particular
use or disclosure of information before the use or disclosure
occurs; or
(2) prevent a lender who is a licensed general
property and casualty agent from selling insurance to a borrower.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 549.054. REQUIRING EVIDENCE OF INSURANCE BEFORE
TERMINATION OF POLICY. A lender may not require a borrower to
provide evidence of insurance earlier than the 15th day before the
termination date of an existing insurance policy.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 549.055. INSURANCE BINDER AS EVIDENCE OF
INSURANCE. (a) A lender that requires a borrower to secure
insurance coverage before the lender will provide a residential
mortgage or commercial real estate loan must accept an insurance
binder as evidence of the required insurance and may not require the
borrower to provide an original insurance policy instead of a
binder if:
(1) the binder is issued by a licensed general
property and casualty agent who is appointed to represent the
insurer whose name appears on the binder and who is authorized to
issue binders;
(2) the binder is accompanied by evidence of payment
of the required premium; and
(3) the binder will be replaced by an original
insurance policy for the required coverage on or before the 30th day
after the date the binder is issued.
(b) A general property and casualty agent who issues an
insurance binder under Subsection (a) must, on request, provide the
lender with appropriate evidence for purposes of Subsection (a)(1).
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 549.056. CERTAIN ACTIONS BY LENDER NOT
PROHIBITED. (a) This subchapter does not prevent a lender from
requiring evidence to be produced before the commencement or
renewal of a risk that insurance has been obtained that:
(1) has a fixed termination date;
(2) provides adequate coverage in an amount sufficient
to cover the debt or loan; and
(3) will not be canceled without reasonable notice to
the lender.
(b) This subchapter does not prevent a lender from requiring
insurance from an insurer that is authorized to engage in business
in this state and that has a licensed resident agent in this state.
(c) This subchapter does not prevent a lender from refusing
to accept or approve insurance from a particular insurer on
reasonable and nondiscriminatory grounds relating to the financial
soundness of the insurer or the insurer's ability to service the
policy.
(d) This subchapter does not prevent a lender from
providing, in accordance with the terms of the mortgage, security
agreement, deed of trust, or other security instrument, insurance
coverage adequate to protect the lender's security interest in
property in the event the borrower fails to provide on or before the
15th day before the termination date of an existing insurance
policy an insurance policy meeting the requirements established by
the lender as authorized by this chapter. A lender that provides
insurance coverage under this subsection may use information
contained in the existing policy for the purpose of determining
that the insurance coverage provided is adequate.
(e) Except as provided by this subsection, this subchapter
does not prevent a lender from requiring at or before the time of
delivery by a general property and casualty agent or insurer of an
insurance policy to the lender a written statement from the
borrower designating the agent or insurer as the borrower's agent
for the delivery of the policy. A lender may not require a
statement described by this subsection when an agent or insurer is
providing a renewal of an existing expiring insurance policy
provided by the agent or insurer.
(f) This subchapter does not prevent a lender from providing
to a person, firm, or corporation that is or becomes the owner or
holder of a note or obligation secured by a mortgage, security
agreement, deed of trust, or other security instrument an insurance
policy or any information contained in an insurance policy that
covers property that is security for the loan.
(g) This subchapter does not prevent a lender from
processing a claim under the terms of an insurance policy that
covers property that is security for a loan.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
SUBCHAPTER C. ENFORCEMENT AND CIVIL REMEDIES
§ 549.101. ENFORCEMENT ACTION. The attorney general,
commissioner, or department may institute a proceeding to enforce
this chapter and to enjoin any individual, partnership,
corporation, association, or other entity from engaging or
attempting to engage in any activity in violation of this chapter.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 549.102. CIVIL DAMAGES. (a) A borrower may recover
from a lender who violates this chapter civil damages in an amount
equal to three times the annual premium for the insurance policy in
force on the property that is security for the loan.
(b) If the insurance policy is for a period of more than one
year, the annual premium is computed by dividing the total premium
specified in the policy for the entire period of the policy by the
number of years of the duration of the policy.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
