INSURANCE CODE
CHAPTER 557. INSURED PROPERTY SUBJECT TO SECURITY INTEREST
SUBCHAPTER A. INSURANCE PROCEEDS HELD BY LENDER PENDING REPAIR OF
RESIDENTIAL REAL PROPERTY
§ 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, § 2, eff. April 1, 2005.
§ 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, § 2, eff. April 1, 2005.
§ 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, § 2, eff. April 1, 2005.
§ 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, § 2, eff. April 1, 2005.
§ 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, § 2, eff. April 1, 2005.
§ 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, § 2, eff. April 1, 2005.
SUBCHAPTER B. LIENHOLDER APPROVAL OF INSURANCE CLAIM PAYMENT
RELATING TO PERSONAL PROPERTY
§ 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, § 2, eff. April 1, 2005.
§ 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, § 2, eff. April 1, 2005.
