HBA-TBM C.S.H.B. 3497 77(R)BILL ANALYSIS


Office of House Bill AnalysisC.S.H.B. 3497
By: Thompson
Insurance
4/23/2001
Committee Report (Substituted)



BACKGROUND AND PURPOSE 

Currently, when an individual takes out a loan to buy a home, the lender
may require the buyer to purchase title insurance to protect the lender's
collateral.  The title insurance company (insurer) bases the policy on a
survey of the property.  Since the cost of a survey can be hundreds of
dollars, any rule adopted by the Texas Department of Insurance (TDI)
requiring an insurer to base each title insurance policy on a new survey
would discriminate against an economically disadvantaged individual.
C.S.H.B. 3497 requires the commissioner of insurance to adopt rules
allowing  an insurer to accept an existing real property survey and
prohibits insurer from discriminating in providing area and boundary
coverage.   

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that rulemaking
authority is expressly delegated to the commissioner of insurance in
SECTION 1 (Article 9.07C, Insurance Code) of this bill.   

ANALYSIS

C.S.H.B. 3497 amends the Insurance Code to authorize the commissioner of
insurance to adopt rules to allow a title insurance company to accept an
existing real property survey and not require a new survey when providing
area and boundary coverage if the title insurance company is willing to
accept evidence of an existing real property survey, and an affidavit
verifying the existing survey, as prescribed by the commissioner,
regardless of the age of the survey or the identity of the person for whom
the survey was prepared.  The bill prohibits a title insurance company from
discriminating in providing area and boundary coverage in connection with
residential real property solely because the real property is platted or
unplatted or a municipality did not accept a subdivision plat in relation
to the real property before September 1, 1975. The bill prohibits a title
insurance company from requiring an indemnity from a seller, buyer,
borrower, or lender to provide area and boundary coverage.  

EFFECTIVE DATE

On passage, or if the Act does not receive the necessary vote, the Act
takes effect September 1, 2001. 

COMPARISON OF ORIGINAL TO SUBSTITUTE

C.S.H.B. 3497 differs from the original by requiring the commissioner of
insurance to adopt rules allowing a title insurance company to accept an
existing real property survey and not require a new survey when providing
area and boundary coverage under certain conditions.  The substitute
prohibits a title insurance company from discriminating in providing area
and boundary coverage in connection with residential real property solely
because the real property is platted or unplatted or a municipality did not
accept a subdivision plat in relation to the real property before September
1, 1975.    

The substitute removes provisions prohibiting a title insurance company or
a title insurance agent from discriminating in providing insurance coverage
as to discrepancies, conflicts, encroachments, location of boundary lines
or similar coverage based on whether a home or other land is located in a
platted or  unplatted subdivision or based on the race, color, religion,
gender, or national origin of the owner.  The substitute removes the
prohibition against a rule or regulation relating to coverage from
discriminating against economically disadvantaged individuals or requiring
other goods or services to be provided or purchased by any person from a
third party or affiliate of an insurer.  The substitute removes the
provision specifying that no rule or regulation may prohibit an insurer
from making sound underwriting decisions in order to provide coverage.  The
substitute removes the provision that requires the insurer's underwriting
to be based on information or guidelines that the insurer deems reasonable.
The substitute removes the prohibition on an insurer regarding indemnity
requirements.