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Title Insurance Basic Manual, Section VII

Title Manual Main Index    

CLAIMS HANDLING PRINCIPLES AND PROCEDURES

 

I. DEFINITIONS When used herein, the following terms shall have the meanings stated below:

  1. CLAIM shall mean the assertion by the Claimant of the existence of a lien, encumbrance, defect or other matter purportedly affecting the title to the estate or interest as insured.

  2. CLAIMANT shall mean an Insured under a policy of title insurance who shall have provided a Notice of Claim to the Insurer of the existence of any Claim.

  3. DAYS shall mean days other than a Saturday, Sunday or a holiday observed by the State of Texas.

  4. INSURER shall mean any Title Insurance Company as defined in Article 9.02(c) of the Texas Insurance Code.

  5. NEW INFORMATION shall mean information not furnished to the Insurer at the time of the classification of the Claim and shall include new or modified allegations, petitions or complaints.

  6. NOTICE OF CLAIM means any written notification to an Insurer by an Insured that reasonably apprises the Insurer of the facts relating to the Claim.

 

II. STANDARDS for handling of Claims by Insurers.

  1. PROOF OF LOSS FORM: If the Insurer requires a Proof of Loss, the Insurer must request the Proof of Loss within 15 days after being notified of a Claim. The Insurer must send the Proof of Loss form, T-40, promulgated by the Texas Department of Insurance to the Claimant.

  2. CONDITIONAL ACCEPTANCE: If the Insurer is unable to accept or deny a Claim in accordance with the terms of the title insurance policy and there is a pending lawsuit which is the subject of the Claim, the Insurer shall provide a defense to the Claimant. The defense may be provided subject to reservations with regard to coverage. The Claimant shall be notified of the reservation of the Insurer's right to contest that a Claim is covered under the policy. The notice must be in writing and state the reasons for such reservation. The notice must fully inform the Claimant of his/her right to contest the Insurer's reservation by stating (1) any time deadlines to contest the reservation under the policy or applicable law, and (2) that the Claimant may litigate (or arbitrate to the extent provided in the policy) the Insurer's reservation, if the Claimant elects.

  3. DENIAL OF CLAIMS: Any denial of the policy coverage of a Claim shall set forth in writing the reasons for such denial. The notice of denial of a Claim must fully inform the Claimant of his/her right to contest the denial by stating (1) any time deadlines to contest the denial of the Claim under the policy or applicable law, and (2) that the Claimant may litigate (or arbitrate to the extent provided in the policy) the Insurer's denial, if the Claimant elects.

  4. LIMITATIONS OF COVERAGE; DENIAL: Unless otherwise provided under the policy, no Insurer shall deny any Claim for the failure of the Claimant to cooperate in the investigation of any Claim, to file any Proof of Loss Form or to otherwise cooperate in the handling of the Claim except as such action may prejudice the rights of the Insurer. If the Claimant has failed to respond within a reasonable time, the Insurer shall notify the Claimant of the failure to provide the information or to cooperate and shall notify the Claimant of the Insurer's intent to take action as permitted by the policy. The notice shall specify a date not less than 30 days after the date of such notice for the Claimant to take such action to comply with the Insurer's request. If the Claimant fails to comply, the Insurer may take the actions specified in the notice.

  5. REDETERMINATION OF POLICY COVERAGE: The insurer may redetermine the classification of any Claim based on New Information.

  6. RELEASE: No Insurer shall request a Claimant to sign a release extending beyond the subject matter giving rise to a settlement unless the additional subject matter of such release has been fairly and openly negotiated between the Insurer and the Claimant, including notice to the Claimant of any consequences of the settlement to the claimant's rights under the policy.

  7. DRAFTS CONTAINING LANGUAGE OF RELEASE: No Insurer shall issue any draft or check to the Claimant when endorsement of the draft or check would release the Insurer from liability. Any release from liability must be a separate agreement, and the signing of a release cannot be a condition for payment of the amount of loss as finally determined and such expenses as are payable under the policy.

  8. RESERVES - SETTING AND REVIEWING: Upon acceptance or conditional acceptance of a claim under a title insurance policy, the title insurer must comply with the provisions of Procedural Rule P-40. Standards for Reserve Setting and Reviewing, in Section IV, Basic Manual of Rules, Rates and Forms for the Writing of Title Insurance in the State of Texas, as set forth below:

    P-40. Standards for Reserve Setting and Reviewing

    Upon acceptance or conditional acceptance of a claim under a title insurance policy, the title insurer must:

    1. set an initial reserve within thirty (30) days.

    2. base the reserve required in (a) on an accurate estimate, in the best judgment of the Company's personnel, of the costs expected to be paid to the insured or other parties in the settlement and processing of the claim. A nominal initial reserve may be used only when opening a file without adequate information to make an appropriate assessment of the risk.

    3. when a nominal initial reserve has been set in accordance with (b) above, change the reserve to reflect the risk as soon as sufficient information has been received.

    4. review each reserve on a regular basis (at least quarterly) and adjust the reserves as warranted by new information or changed circumstances. It is equally important that a claim not be over-reserved or under-reserved.

    5. maintain written records of the initial reserve and any change to the reserve, including the reasons for any change in the reserve, in the file for review by the Commissioner for a period of four (4) years.

 

III. TIME SCHEDULE for handling of Claim by title Insurers.

  1. ACKNOWLEDGEMENT AND INVESTIGATION OF CLAIM: The insurer shall, within 15 days after a Notice of Claim, (1) acknowledge the Claim, (2) commence investigation of the Claim and (3) request necessary information that is allowed to be requested by the policy. The Insurer may request additional necessary information during the progress of the investigation.

  2. CLASSIFICATION OF CLAIMS (1) ACCEPTANCE; (2) DENIAL; (3) CONDITIONAL ACCEPTANCE: After the Insurer receives all of the requested information, the Insurer shall notify the Claimant of the acceptance, denial or conditional acceptance of the Claim. This notice shall be sent to the Claimant within 30 days of receipt of such information. However, should the Insurer be unable to determine whether to accept or deny or conditionally accept the Claim within the time specified in this regulation, the Insurer may notify the Claimant of the Insurer's inability to accept, deny or conditionally accept the Claim. The notice shall provide the reason(s) for the inability to accept, deny or conditionally accept the Claim.

  3. COMMENCEMENT OF ACTION BY INSURER: The Insurer shall commence an action or a combination of actions authorized under the policy of insurance or under Article 9.57 of the Texas Insurance Code within 15 days after notification to the Claimant of the Acceptance or conditional acceptance of the Claim. The Insurer may comply with this section by (I) employment of appraisers or other persons with knowledge of the value of real property to determine the extent of the loss under the policy; (ii) written correspondence with third parties to secure a release or satisfaction of the Claim; (iii) employment of counsel to commence or defend on the claim in current or new litigation; or (iv) other written correspondence or evidence of commencement of action by the Insurer.

  4. PAYMENT OF LOSS: When liability and the extent of loss has been finally fixed in accordance with the provisions of the policy, the loss shall be payable within 10 days thereafter.

  5. LIMITATION OF CLAIM RECLASSIFICATION: Any reclassification shall be made within 30 days of the Insurer's receipt of New Information supporting a change. The Insurer shall provide notice to the Claimant within 15 days of any reclassification. The notice must state the reasons for the reclassification. The notice must fully inform the Claimant of his/her right to contest the reclassification by stating (1) any time deadlines to contest the reclassification of the Claim under the policy or applicable law, and (2) that the claimant may litigate (or arbitrate to the extent provided in the policy) the Insurer's reclassification, if the Claimant elects.

 

IV. SCHEDULE for the implementation of these regulations.

These regulations shall become effective on the 30th day of October, 1992, with regard to all Claims submitted after that date. These regulations shall not apply to any Claim which is the subject of any notification received by an Insurer prior to the effective date of these regulations.

 


Texas Title Insurance Proof of Loss Form (Form T-40)


Title Manual Main Index


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Last updated: 02/28/2014



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