The Commissioner of Insurance adopts amendments to §9.1 and §9.401 which concern the adoption by reference of certain amendments to the Basic Manual of Rules, Rates and Forms for the Writing of Title Insurance in the State of Texas (Basic Manual) and to the Texas Title Insurance Statistical Plan (Statistical Plan). The amended sections are adopted with changes to the proposed text and to the items adopted by reference as published in the December 28, 2001, issue of the Texas Register (26 TexReg 10780).

The amendments reflect changes to the Basic Manual and the Statistical Plan which the amended sections adopt by reference and which were considered at the rulemaking phase of the 2000 Texas Title Insurance Biennial Hearing. Adopting new rules and forms and modifying or replacing currently existing rules and forms in the Basic Manual and Statistical Plan facilitate the administration and regulation of title insurance in this state. The amendments to the Basic Manual and Statistical Plan clarify and standardize the rules and forms regulating title insurance. The amendments to the Basic Manual and Statistical Plan are identified by item number and result from consideration at the 2000 Texas Title Insurance Biennial Hearing, Rulemaking Phase, Docket Number 2470, (rulemaking hearing), held on November 27, 2001. Of the remaining agenda items, Items 2000-20, 2000-21, 2000-22, 2000-23, 2000-24, 2000-25, 2000-31, 2000-E, 2000-G, 2000-H, and 2000-K were withdrawn at the rulemaking hearing by their respective submitters, and Items 2000-17, 2000-F, and 2000-J, were not adopted, which decision was set forth in a separate Commissioner's Order.

The effective date of the sections as published in the proposal was February 28, 2002; the effective date of the sections has been changed to April 4, 2002. The department has made typographical corrections to the items adopted by reference, and based on comments, the department has changed Agenda Item 2000-27 by eliminating from the new language in P-22(B) the phrase, "is a Title Insurance Agent or Title Insurance Company and who" to make the reference to "Person" in that paragraph consistent with the reference in P-22(A) and by adding to the beginning of the new language, the phrase, "If the parties to the transaction are located in different counties," to clarify the intention to accommodate multi-county transactions. Also in response to comments, the department has corrected the inadvertent omission of the word "Improvements" from the term "Tenant Leasehold Improvements" in paragraph 3.d of Agenda Item 2000-16. Further in response to comments, Agenda Item 2000-I relating to amendments to Procedural Rule P-24 is not adopted; however, the department will propose amendments in a subsequent rule proposal upon additional study and recommendations concerning workable realistic parameters governing the division of premiums between entities performing title services.

The items which are the subject of this adoption are as follows:

Eleven items relate to mortgagee policy endorsements. The purpose of these endorsements is to streamline the mortgage lending process by allowing lenders to efficiently and economically close and package real estate loans for resale in the secondary lending market. This reflects a nationwide trend regarding uniformity of these types of endorsements so lenders can readily identify the types of coverages available on each particular loan. The department has made corrective and clarifying changes to these items and has assigned form numbers to each item. A brief description of each item follows its listing:

Item 2000-1 - Adoption of a new First Loss Endorsement (Form T-14). This endorsement will be available for mortgagee policies and will typically be used in large commercial transactions. It will allow a lender to make a claim on its policy, without having to first foreclose on its lien, if appraisals show there has been a diminution in value of at least 10%.

Item 2000-2 - Adoption of a new Last Dollar Endorsement (Form T-15). This endorsement will be available for mortgagee policies. Normally, policy limits are reduced as the principle is paid down. With this endorsement, loan payments will be applied first against the value of any personal property or non-Texas realty securing the loan and will not reduce the policy limits unless and until the loan amount secured by those other properties has been paid down completely.

Item 2000-3 - Adoption of a new Mortgagee Policy Aggregation Endorsement (Form T-16). When a loan is secured by land in multiple states, this endorsement for mortgagee's policies will allow any claim on any piece of property to be paid out of the aggregate coverage from all the title policies involved. Coverage will be reduced 'pro tanto', meaning dollar for dollar.

Item 2000-4 - Adoption of a new Planned Unit Development Endorsement (Form T-17). This endorsement for mortgagee's policies will give expanded coverage for restrictions, assessments, rights of first refusal, and forcible removal of structures. Planned Unit Developments are organized in such a way that facilitates the sort of search/due diligence that would be required in underwriting such risks.

Item 2000-5 - Adoption of an amendment to Procedural Rule P-9, Endorsement of Owner or Mortgagee Policies. This procedural rule will authorize the use of the endorsements described in Items 2000-1 through 2000-4.

Item 2000-6 - Adoption of a new Restrictions, Encroachments, Minerals Endorsement (Form T-19). This endorsement provides coverage for losses arising out of restrictions which have established easements, or provided for an option to purchase, a right of first refusal or the prior approval of a future purchaser or occupant, as well as building setback line violations. Also covered is damage to existing buildings located or encroaching upon any portion of the land subject to any easement excepted in Schedule B that results from the future exercise of any right existing on the date of the policy to use the surface of the land for the extraction or development of minerals excepted from the description of the land or excepted in Schedule B and from a final court order or judgment requiring removal from the land adjoining the insured land of any encroachment, other than fences, landscaping or driveways, excepted in Schedule B.

Item 2000-7 - Adoption of a new procedural rule (P-50) for the new Restrictions, Encroachments, Minerals Endorsement. This procedural rule authorizes the use of the endorsement described in Item 2000-6.

Item 2000-8 - Adoption of a Texas Short Form Residential Mortgagee Policy of Title Insurance (T-2R) and Addendum (T-2R Addendum). This short form will aid in logistics and speed the delivery of policies by giving the insured a checklist by which to elect various endorsements and make the language more consistent with American Land Title Association forms.

Three items will implement the short form checklist policy and provide clean up language in certain rules and forms as detailed herein:

Item 2000-9 - Adoption of an amendment to Procedural Rule P-1 to make reference to direct operations and the new Texas Short Form Residential Mortgagee Policy.

Item 2000-10 - Adoption of a new procedural rule (P-51) to implement the new Texas Short Form Residential Mortgagee Policy.

Item 2000-11 - Adoption of an amendment to Schedules A and B of the Commitment for Title Insurance (Form T-7) to reference application of the new Texas Short Form Residential Mortgagee Policy.

Item 2000-12 - Adoption of an amendment to Procedural Rule P-17, Electronically Produced Endorsement Forms. This amendment will allow title companies to electronically produce forms and endorsements and make allowance for electronic signatures while preserving safeguards for document retention and audit.

Item 2000-13 - Adoption of an amendment to paragraph 1 of the Conditions and Stipulations of the Texas Owner Policy of Title Insurance (Form T-1). This item amends the definition of insureds to add limited liability companies and limited liability partnerships. Such companies were not authorized in Texas when the form was last revised.

Three items amend existing leasehold endorsements to incorporate the language of recent revisions to the American Land Title Association forms, including changes in the definition of valuation of an estate:

Item 2000-14 - Adoption of an amendment to the Leasehold Owner Policy Endorsement (Form T-4).

Item 2000-15 - Adoption of an amendment to the Residential Leasehold Endorsement (Form T-4R).

Item 2000-16 - Adoption of an amendment to the Leasehold Mortgagee Policy Endorsement (Form T-5) should allow more flexibility in calculating damages in an eviction.

Two items concern amendments regarding the use of surveys in title insurance. Existing Procedural Rule P-2 provides that a current survey must be purchased as a prerequisite for the survey deletion, except in residential refinances in which a seven year old survey can be used. The 77th Legislature enacted Senate Bill 1707, which added Insurance Code Article 9.07C to provide that a survey of any age can be used if it is acceptable to the underwriter and an affidavit verifying the existing survey is provided. The adopted amendments will implement the legislation and make conforming amendments to the title commitment form. Further, the department has noted on the promulgated residential real property affidavit that it may also be modified as appropriate for commercial transactions.

Item 2000-18 - Adoption of an amendment to Procedural Rule P-2, Amendment of Exception to Area and Boundaries.

Item 2000-19 - Adoption of an amendment to the Commitment for Title Insurance (Form T-7).

The following six items correct typographical errors, update minimum escrow requirements, clarify the good funds rule, revise the Statistical Plan, and establish document retention rules:

Item 2000-26 - Adoption of an amendment to the Minimum Standards, Specific Instructions and Report Forms for Audit of Trust Funds Required of Texas Title Insurance Agents, Direct Operations, Title Attorneys and Attorneys Licensed as Escrow Officers. This amendment to the Minimum Escrow Procedures clarifies issues related to escrow accounts and copies of checks and clarifies reporting deadlines.

Item 2000-27 - Adoption of an amendment to Procedural Rule P-22 to be more consistent with Procedural Rules P-1 and P-24. This amendment clarifies issues related to the payment of fees for examination and closing and also accommodates multi-county transactions.

Item 2000-28 - Adoption of an amendment to Procedural Rule P-27, Disbursement from Trust Fund Accounts. This amendment clarifies "good funds" requirements to aid in preserving the integrity of escrow accounts.

Item 2000-29 - Adoption of an amendment to Procedural Rule P-28 to correct an address of the department.

Item 2000-30 - Adoption of a new Procedural Rule P-32 regarding document retention. This amendment clarifies document retention requirements in light of emerging electronic data storage technologies, while maintaining the department's ability to audit and verify information. Title policies must be kept indefinitely; hard copies of evidence of insurability must be kept for 3 years and thereafter can be electronically scanned and kept for the remainder of the 15 year retention period as required by Article 9.34, and escrow documentation is subject to a 3 year retention schedule. Read in conjunction with the amendments to P-17 (Agenda Item 2000-12), documents which are initially computer generated or electronically produced may be retained in that medium.

Item 2000-32 - Adoption of an amendment to the Texas Title Insurance Statistical Plan updates and revises reporting codes.

Item 2000-A - Adoption of a new Procedural Rule P-52 regarding delivery of pro forma policies and promulgated forms. This procedural rule will allow companies to issue pro forma policies in commercial transactions in excess of $500,000.

The following three items are designed to allow consumers to obtain title insurance on manufactured housing characterized as real property pursuant to recent legislative changes:

Item 2000-B - Adoption of a Supplemental Coverage Manufactured Housing Unit Endorsement (Form T-31.1).

Item 2000-C - Adoption of an amendment to Procedural Rule 9.b.(7) to implement the adoption of the Supplemental Coverage Manufactured Housing Unit Endorsement (Form T-31.1).

Item 2000-D - Adoption of an amendment to Procedural Rule 9.a. to implement the adoption of the Supplemental Coverage Manufactured Housing Unit Endorsement (Form T-31.1).

The department has filed a copy of each of the adopted items with the Secretary of State's Texas Register section. Persons desiring copies of the adopted items can obtain them from the Office of the Chief Clerk, Texas Department of Insurance, 333 Guadalupe Street, Austin, Texas, 78714-9104. To request copies, please contact Sylvia Gutierrez at 512/463-6327.

Agenda Items 2000-1 through 2000-5:

Comment: Two commenters expressed concerns about the impact of these endorsements and the implementing procedural rule in terms of solvency, including impact on the title insurance guaranty fund, and reverse competition. The commenters would like to see loss experience on these endorsements and would like to see the endorsements incorporated into the standard policies. One commenter felt that these endorsements should be issued on owner policies as well as mortgagee policies and stated that residential consumers will be subsidizing commercial lenders. The commenter also stated that the first loss endorsement will help big commercial lenders and give them a special benefit that is not given to small consumers.

Agency Response: The department appreciates the commenters' concerns regarding solvency and reverse competition and intends to monitor the use of these endorsements. Experience with commercial lenders will assist the department in determining whether and to what extent the use of similar endorsements should be expanded at a later date. The department believes that it will be beneficial to make these endorsements, with which national lenders are familiar, available to allow for the efficient closing and transfer of real estate in Texas.

Comment: A commenter supported the endorsements and stated that not all of them will be used in every real estate transaction. The commenter felt that if the endorsements are included in the standard mortgagee policy, then it will be difficult to exclude them when necessary and then to try and price the policy by trying to determine how many policies had one endorsement eliminated versus another endorsement eliminated. The commenter further stated that having endorsements that lenders are familiar with will streamline the process.

Agency Response: The department agrees that streamlining the real estate transaction process is a good goal, and that experience with these endorsements will help the department determine whether the frequent use of these endorsements warrants their incorporation into standard policies.

Comment: Another commenter pointed out that incorporation of these endorsements to all mortgagee and owner policies would not be appropriate because of inapplicability in many instances. The commenter also spoke to the relationship of the mortgagee policy aggregation endorsement and the title insurance guaranty fund by pointing out that the guaranty fund caps would still be in place and that a title insurer would still be subject to statutory premium reserve requirements. The commenter also stated that this aggregation endorsement may possibly reduce exposure in Texas for the guaranty fund if a loss occurs in another state and all liability limits are used there.

Agency Response: The department agrees with the analysis, and as noted, the department hopes to gain further information based on experience with the use of these endorsements.

Agenda Items 2000-6 through 2000-7:

Comment: Two commenters stated their belief that the restrictions, encroachments, and minerals endorsement and its implementing procedural rule will increase costs, and they suggested that the loss experience be studied with this endorsement. They further suggested that if the losses do not prove to be significant then the coverage should be put in the policy instead of in an endorsement. They also stated that the endorsement overlaps with survey coverage and with the planned unit development endorsement.

Agency Response: The department restates its willingness to consider expanding the use of the endorsement if appropriate. The department is persuaded of the benefit of this nationally recognized endorsement whose purpose is to protect a lender's priority of lien against covenants, conditions, and restrictions.

Agenda Items 2000-8 through 2000-11:

Comment: Two commenters expressed their concerns that this new short form residential mortgagee policy, while of benefit to the lenders, will not benefit the owner-consumers who are actually paying for these policies. The commenters stated the necessity to look at costs in terms of passing these along to consumers.

Agency Response: The department appreciates these concerns; however, the department believes that it is beneficial to make this short form policy available to allow for efficient closing and transfer of real estate in Texas. The department will also consider the impact of this product on title industry costs as experience is gained.

Comment: One commenter expressed support for the adoption of a Texas Short Form Residential Mortgagee Policy of Title Insurance. The commenter stated that the short form will expedite production by lenders and title companies. The commenter further referenced information from a national mortgage association that use of the short form may reduce the possibility of fraudulent or non-existent loans being placed in pools. Another commenter urged adoption of Agenda Item 2000-8 as allowing companies to make better use of technology and reduce cost, and suggested allowing an underwriter, at its option and with the prior approval of its insured, to issue electronic policies and endorsements and other promulgated forms without reproducing the "boilerplate" language but incorporating it by reference.

Agency Response: The department agrees as to the apparent advantages of the short form, subject to the monitoring issues raised in the comment process. The department agrees with a commenter's statements about making better use of technology, but declines the suggestion regarding referencing of boilerplate language on a global basis as being contrary to Insurance Code Article 9.07.

Agenda Item 2000-12:

Comment: Several commenters supported this agenda item dealing with electronically produced forms and noted its consistency with federal and state electronic transactions legislation. One commenter suggested adding a requirement that endorsements also be numbered for statistical reports so the department has the opportunity to audit the money that is being spent by consumers for those endorsements, although another commenter stated that this would be immensely expensive, time consuming, and extremely difficult to put in place. Another commenter inquired as to whether licensed title agents and escrow officers can authorize an unlicensed individual to execute their electronic signature. Another commenter suggested allowing an underwriter, at its option and with the prior approval of its insured, to issue electronic policies and endorsements and other promulgated forms without reproducing the "boilerplate" language but incorporating it by reference.

Agency Response: The department agrees that these amendments regarding electronically produced forms and safeguarded electronic signatures are appropriate initial steps into the era of electronic commerce. The department intends to monitor closely the use of this procedural rule and will act accordingly if the electronic process is not safeguarded. In this regard, the department notes that the amendments call for a "safeguarded electronic signature"; therefore, just as licensed individuals cannot delegate the signing of their original signature, it is the department's position that an electronic signature can likewise not be delegated. As to the suggestion regarding numbering endorsements for audit purposes, the department points out that endorsements are tracked by category and premium in the statistical plan, and therefore, individual numbering of endorsements would not add to that audit function. Additionally, the department recognizes the response of a commenter that individually numbering endorsements would be very expensive and time-consuming. The department declines the suggestion regarding referencing of boilerplate language on a global basis as being contrary to Insurance Code Article 9.07.

Agenda Item 2000-13:

Comment: Two commenters supported this amendment to the owner policy of title insurance to include limited liability companies and limited liability partnerships as successors in interest to a named insured. The commenters stated that this is mostly a technical amendment to update the kinds of commercial entities doing business in Texas and that it clarifies the definition of "insured."

Agency Response: The department appreciates the support and agrees that it is primarily a technical amendment.

Agenda Items 2000-14 through 2000-16:

Comment: Several commenters stated support of these leasehold endorsement forms that conform to the recently adopted leasehold endorsement forms by the American Land Title Association. The commenters detailed some of the provisions of the forms, including a change in the method of valuation of the leasehold estate in the event of loss to include damages from loss of tenant improvement and a change which increased the distance coverage of moving costs of personal property as a result of eviction of the lessee. A commenter has also pointed out the inadvertent omission of the word "Improvements" from the term "Tenant Leasehold Improvements" in paragraph 3.d of Agenda Item 2000-16.

Agency Response: The department appreciates the comments and has corrected paragraph 3.d of Agenda Item 2000-16.

Agenda Items 2000-18 through 2000-19:

Comment: Several commenters supported agenda item 2000-18 dealing with the use of surveys as being the preferable approach in line with Senate Bill 1707, as enacted by the 77th Legislature, which added Insurance Code Article 9.07C to provide that a survey of any age can be used if it is acceptable to the underwriter and an affidavit verifying the existing survey is provided. The commenters also stated that the agenda item provides consumer protections. One commenter noted that this amendment to Procedural Rule P-2 will require a survey in all instances, and that will clarify an interpretation that some companies had, that evidence other than a survey could be relied on. The commenter stated that this amendment dispels that interpretation.

Agency Response: The department agrees.

Comment: Several commenters opposed agenda item 2000-18 and stated that 2000-18 does not define the required elements of a survey, does not deal with copyright problems that may exist with using prior surveys, and allows an affidavit by persons not in privity of contract. Another commenter stated that the proposal denigrates the quality of information that consumers get and suggested that the amendment just define "current." The commenter also suggested encouraging owners to get the survey exception deleted by reducing the rate that consumers must pay. One commenter suggested a task force to resolve the issues regarding the survey. One commenter stated that the Texas Real Estate Commission's amended earnest money contract form for one-to-four family residential resales has language regarding use of existing surveys along with a requirement of the seller's affidavit acceptable to the title company for approval of the survey that the commenter suggested be used in the amendment to Procedural Rule P-2.

Agency Response: The department disagrees. The amendment to Procedural Rule P-2 is consistent with Insurance Code Article 9.07C, provides and preserves various consumer protections, and seeks to require accurate information. As noted by other commenters, the procedural rule and statute are permissive; in lieu of requiring a new survey, a title insurance company may accept evidence of an existing survey with an affidavit verifying same, notwithstanding the age of the survey or the identity of the person for whom the survey was prepared. In any event, the survey must be acceptable to the title insurance company, and this is consistent with the statute and apparently consistent with a commenter's quoted provision from the Texas Real Estate Commission's amended earnest money contract form for one-to-four family residential resales. The department also notes that copyright law will control the use of new and existing surveys, and this procedural rule does not impinge on that law. The department believes that this amendment is an acceptable compromise to the survey issue as well as being consistent with the legislative action; therefore, a task force will not be needed.

Agenda Items 2000-20 through 2000-22:

Comment: Although these agenda items concerning a proposed Residential Homeowner's Endorsement and corresponding procedural rule and form were withdrawn by the submitter, several commenters spoke in support of these types of coverages as being pro consumer and as being available in all states except four. There were also recommendations to consider a task force to review these types of coverages.

Agency Response: The department is amenable to consideration of how to make available pro consumer coverages while at the same time keeping those coverages within the definition of "title insurance" set forth in Article 9 of the Insurance Code. The department notes that it has encouraged all interested persons to continue to work together to resolve the issues concerning residential homeowner's coverages.

Comment: One commenter objected to the approval of certain of the coverages contained in the proposed endorsement as being too expensive and time consuming for title plants to index and update or as being not traditional title insurance, or as expanding to cover post policy matters and therefore being casualty insurance.

Agency Response: The department reiterates that all interested persons should continue to work together to resolve the issues concerning residential homeowner's coverages, and as noted, the department is amenable to consideration of how to make available pro consumer coverages while at the same time keeping those coverages within the definition of "title insurance" set forth in Article 9 of the Insurance Code.

Agenda Item 2000-26 through 2000-30 and 2000-32:

Comment: Several commenters supported these agenda items. One commenter specifically referenced agenda items 2000-26 through 2000-28 as promoting clarification and consistency with banking practices and the closing of transactions. One commenter suggested adding a requirement to agenda item 2000-30 to require that policies be electronically indexed by street address, insured's name, buyer and seller, and the lender's name so as to locate the policy quickly, although several commenters responded that with computerized forms, a word search could find these categories, and beyond that, the imposition of such a requirement would be too onerous and costly on a system that is indexed by land and not all of the information, such as street addresses, may be known at the time of the transaction.

Agency Response: The department appreciates the statements of support and agrees with those commenters who pointed out the inherent problems in imposing a different indexing system to locate policies. The movement toward computerization of documents will alleviate some of the concerns about ease of locating policies, and the current system of indexing by land is workable for title examination.

Comment: One commenter, in regard to Agenda Item 2000-27, pointed out that the amendments to Procedural Rule P-22 concerning new language in P-22(B) does not include a reference to an attorney at law such as is contained in P-22(A). The commenter stated that in several counties there exist arrangements for payments to attorneys for performing a portion of the closing, which the commenter noted have been determined by the department to be a violation of Insurance Code Article 9.30(B). The commenter further stated the commenter's belief that this portion of Agenda Item 2000-27 was intended to resolve this matter, but failed to address payment to an attorney.

Agency Response: The department disagrees with the commenter's interpretation of that particular purpose of Agenda Item 2000-27. The portion of Agenda Item 2000-27 concerning payments to persons who perform all of the closing services for either the seller, buyer, mortgagor, or mortgagee is intended to accommodate multi-county transactions in which for example, the seller and buyer are each located in different counties and do not want to travel to the other's county for the closing. The amendment to P-22(B) was to allow payment to the person closing the transaction as long as the person performs all of the closing services for either the seller or the buyer in closing the transaction (or for either the mortgagor or mortgagee as the case may be). This is different from the commenter's description of arrangements in which a person performs only a portion of the closing, which would be a violation of Article 9.30(B). The department recognizes, however, the commenter's point about omitting the reference to an attorney at law which makes P-22(B) inconsistent with P-22(A); therefore, the department has clarified the new language in P-22(B) by deleting the phrase, "is a Title Insurance Agent or Title Insurance Company and who" to make consistent paragraphs (A) and (B) of P-22.

Comment: Another commenter stated the need to clarify the new language in Procedural Rule P-22(B) to conform to its intention to accommodate multi-county transactions.

Agency Response: The department agrees and has added to the beginning of the new language, the phrase, "If the parties to the transaction are located in different counties," to clarify the intention to accommodate multi-county transactions.

Agenda Item 2000-A:

Comment: Several commenters supported this agenda item dealing with pro-forma policies. Two commenters stated that although they had initial concerns about the scope of the application and about compliance with the promulgated form requirements of Insurance Code Article 9.07, these concerns have been eased by the limitation to commercial policies and the disclosure provisions concerning translation and disclaimers.

Agency Response: The department agrees.

Comment: One commenter opposed the agenda item stating that pro forma policies can be subject to fraud and further expressed concern over the impact on the title insurance guaranty fund. The commenter also stated that valid recorded liens should be shown on any pro-forma policy or promulgated form. Another commenter responded to these concerns by stating that issuance without exception to outstanding mortgages will not be authorized since the rule requires a disclosure that it does not reflect the existing status of title. The responding commenter also noted that the preparation of pro forma policies is very common in commercial transactions in other states and is commonly requested on large commercial transactions.

Agency Response: The department appreciates the concerns regarding fraud and the impact on the title insurance guaranty fund; accordingly, this agenda item is adopted with the various limitations, disclosures, and disclaimers. The department will also monitor the use of pro forma policies to determine whether their continued use is justified or whether additional limitations are needed.

Agenda Items 2000-B, 2000-C, and 2000-D:

Comment: Several commenters supported this group of agenda items that implement House Bill 1869, enacted by the 77th Legislature, to allow loans on manufactured homes and loans on real property to be combined. One commenter stated that these endorsements are consumer friendly.

Agency Response: The department agrees.

Agenda Item 2000-I:

Comment: Many commenters supported this agenda item dealing with determining the split of premium between the title agent controlling the premium and another title agent. The commenters stated that eliminating the "unless" clause, concerning a prior written agreement, in Procedural Rule P-24 will prevent what has been a negotiation of the premium split on each deal that the commenters said resulted in minimizing the percentage of premiums paid to the agents owning and maintaining title plants that generate the product being sold, and that this mainly falls on the local and rural agents. One commenter refuted the argument that Insurance Code Article 9.30(b)(2) prevents setting a split in P-24 as constituting a prohibited minimum by stating that setting a maximum does not establish a minimum. Another commenter stated that the "prior written agreement" exception allows an underwriter or whoever controls the title order to get a share of the work product portion of the title premium, and some commenters stated that the history of the "prior written agreement" provision was to preserve those agreements that were already in place when P-24 was first adopted. Another commenter stated that the only exception to striking the "prior written agreement" provision would be one that is truly based on a long term relationship, documented fully in writing and filed with the department. Other commenters stated that the "prior written agreement" exception allows a portion of the premium to go to marketing and further allows other states to take advantage of the Texas rates. Several commenters opposed the suggestion for creation of a task force made by opponents of the agenda item, or suggested that if there is a task force, to adopt the agenda item pending the work of the task force. One commenter stated that the actual issue involved is a matter of negotiation of a share of money based on the legislature's regulation of premium.

Many commenters opposed this agenda item and stated that Procedural Rule P-24 has withstood the test of time and that the issue is more a question of competition and addressing new business models. Some commenters disagreed that the "prior written agreement" language was for pre-existing arrangements only and stated the belief that the language was promulgated to allow companies to transact business in the free market place they choose. The commenters also said that any amendment would have to account for existing arrangements that have been in place for years and suggested a study group or committee to discuss any amendment to P-24. Several commenters stated that metropolitan agents rely on the ability to negotiate with willing agents across county lines without having to buy a title plant. Some commenters stated that consumer negotiation should be allowed also. Some commenters supported facilitating across-county cooperation and referenced prior committee work on this issue to separate rural and metropolitan agents. These commenters opposed the agenda item in its present form. The commenters believed that no one solution is available for all agents and encouraged assigning this issue for study by a committee comprised of representatives of the department, title insurance underwriters, rural county title agents, and metropolitan area title agents. The commenters believe that removing the negotiation provision will put independent agents at a disadvantage with attorneys and underwriters' direct agent operations. The commenters also stated that setting fair and reasonable premium splits for agents in smaller counties will ensure their longevity and protect the integrity of title policies, while allowing metropolitan agents to negotiate splits will benefit consumers by reducing overall costs. Another commenter stated the belief that any separation between rural and metropolitan agents would be discriminatory. Several commenters called for the appointment of a task force with defined charges to present a compromise within a specified time.

Agency Response: The department is mindful of the circumstances in which P-24 is sometimes used to reduce the percentage of premiums paid to the agents owning and maintaining title plants that generate the product being sold, and that this many times can fall on the local and rural agents. The department is also aware, however, that the percentages and parameters which resulted from the discussions and development of P-24 have been used over the years, and each person has been making business decisions within that environment. The department further recognizes that differences between types of agents can create different needs and that current and developing business models require flexibility in the percentage of division of premiums between entities performing title services. Accordingly, Agenda Item 2000-I is not adopted; however, the department will propose amendments in a subsequent rule proposal upon additional study and recommendations concerning workable realistic parameters governing the division of premiums between entities performing title services.

General comment:

Comment: One commenter stated that he would like to be able to accept major credit cards for the payment of closing costs with the $1,500.00 limitation that now exists for personal checks. The commenter feels that this will allow modern sales procedures in line with public expectations.

Agency Response: The department disagrees since a credit card consumer has a longer period of time to cancel the transaction thus exposing the integrity of the escrow closing fund process.

For with changes: Texas Land Title Association; Stewart Title Guaranty Company; Office of Public Insurance Counsel; Individual consumers; Columbian National Title Insurance Company; Southern Texas Title Company; Sierra Title Company, Inc., Metro Title Company, Inc., d/b/a Sierra Title of Cameron & Willacy Counties, Sierra Title of North Texas, Inc., Sierra Title of Corpus Christi, L.L.C., and Sierra Title of Hidalgo County, Inc. (Sierra Group); Franklin County Abstract; Chambers County Abstract Company, Inc.; Stone Title Company; Security Land Title Company; Rusk County Abstract Company; Moseley Abstract Company; Farwell Abstract Company and Muleshoe Abstract Company; Cass County Title Company; West Texas Abstract & Title Company; South Plains Abstract Company; Lubbock Abstract & Title Company; Ector County Abstract & Title Company, Inc.; Archer Title Company, Inc.; Southwest Abstract Company, Inc.; Service Title Company; Western Abstract and Title Company; Panola County Abstract & Title Company; Yoakum County Abstract Company; Elliott and Waldron Abstract Company of Pecos; Border Title Group; Pittsburg Title Company; Andrews Abstract Company; Bay City Abstract & Title Company; The Hays County Abstract Company; Throckmorton County Abstract, Inc.; Spiller Abstract Company, Inc.; Hockley County Abstract Company, Inc.; Countywide Abstract & Title, Inc.; Jordan & McCollum Abstracters, Inc.; West Texas Title Company, Inc.; Eastland Title Company; Sabine Title Company; Professional Title Services, Inc.; Crossroads Abstract & Title Company, Inc.; San Jacinto Title Services of Corpus Christi, LLC; Jefferson County Title; Huntsville Abstract & Title Company; American Land Title, Inc.; Bedgood Abstract & Title Co.; Lynn County Abstract; Arnold Abstract Company (Rusk County) and Attorneys Land & Title Company (Wood County); Mid-Coast Title Co., Inc.; Texas Association of Abstractors & Title Agents; The Brown County Abstract Co., Inc.; Washington County Abstract Company; Service Title Company (San Antonio); Hopkins County Abstract Company; Harrison Title; United General Title; Professional Land Title Company; Cole Title Company; legislators; several independent title agents.

Against with changes: Office of Public Insurance Counsel; Individual consumers; Texas Society of Professional Surveyors; real estate lawyers; registered professional land surveyor; North American Title Insurance Corporation; Travis Title Company; Safeco Land Title (Dallas); First American Title Insurance Company of Texas; Commerce Land Title and Centex Corporation; DRH Title Company of Texas, Ltd; Georgetown Title Company, Inc.; Lone Star Title, Inc.; Realty Executives; Lone Star Realty; Lone Star Title of El Paso; Reagan County Abstract & Title Company; Longhorn Title Company, Inc.; Ryland Title; Netco, Inc.; West Star National Title Company, LLC; legislators; Title Insurance Company of America; First Fidelity Title; Commerce Title Co. (Coppell); Commerce Title Company (San Antonio); Title Resources Guaranty Co.

Neither for or against (Procedural Rule P-24): Independent Metropolitan Title Insurance Agents of Texas; Texas Land Title Association.

Subchapter A. BASIC MANUAL OF RULES, RATES, AND FORMS FOR THE WRITING OF TITLE INSURANCE IN THE STATE OF TEXAS

Subchapter M. MANDATORY BENEFIT NOTICE REQUIREMENTS

Subchapter C. AUDIT COVERAGES REQUIRED FOR GUARANTY ASSOCIATIONS