Texas Insurance Code 2502.006 – Certain Extra Hazardous Coverages Prohibited
(a) A title insurance company may not insure against loss or damage sustained by reason of any claim that under federal bankruptcy, state insolvency, or similar creditor’s rights laws the transaction vesting title in the insured as shown in the policy or creating the lien of the insured mortgage is:
(1) a preference or preferential transfer under 11 U.S.C. § 547;
(2) a fraudulent transfer under 11 U.S.C. § 548;
(3) a transfer that is fraudulent as to present and future creditors under Section 24.005, Business & Commerce Code, or a similar law of another state; or
(4) a transfer that is fraudulent as to present creditors under Section 24.006, Business & Commerce Code, or a similar law of another state.
(b) The commissioner may by rule designate coverages that violate this section. It is not a defense against a claim that a title insurance company has violated this section that the commissioner has not adopted a rule under this subsection.
Terms Used In Texas Insurance Code 2502.006
- Bankruptcy: Refers to statutes and judicial proceedings involving persons or businesses that cannot pay their debts and seek the assistance of the court in getting a fresh start. Under the protection of the bankruptcy court, debtors may discharge their debts, perhaps by paying a portion of each debt. Bankruptcy judges preside over these proceedings.
- Contract: A legal written agreement that becomes binding when signed.
- Lien: A claim against real or personal property in satisfaction of a debt.
- Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
- Rule: includes regulation. See Texas Government Code 311.005
- United States: includes a department, bureau, or other agency of the United States of America. See Texas Government Code 311.005
(c) Title insurance issued in or on a form prescribed by the commissioner shall be considered to comply with this section.
(d) Nothing in this section prohibits title insurance with respect to liens, encumbrances, or other defects to title to land that:
(1) appear in the public records before the date on which the contract of title insurance is made;
(2) occur or result from transactions before the transaction vesting title in the insured or creating the lien of the insured mortgage; or
(3) result from failure to timely perfect or record any instrument before the date on which the contract of title insurance is made.
(e) A title insurance company may not engage in the business of title insurance in this state if the title insurance company provides insurance of the type prohibited by Subsection (a) anywhere in the United States, except to the extent that the laws of another state require the title insurance company to provide that type of insurance.