CHAPTER 557. INSURED PROPERTY SUBJECT TO SECURITY INTEREST
INSURANCE CODE
TITLE 5. PROTECTION OF CONSUMER INTERESTS
SUBTITLE C. DECEPTIVE, UNFAIR, AND PROHIBITED PRACTICES
CHAPTER 557. INSURED PROPERTY SUBJECT TO SECURITY INTEREST
SUBCHAPTER A. INSURANCE PROCEEDS HELD BY LENDER PENDING REPAIR OF
RESIDENTIAL REAL PROPERTY
Sec. 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, Sec. 2, eff. April 1,
2005.
Sec. 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, Sec. 2, eff. April 1,
2005.
Sec. 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, Sec. 2, eff. April 1,
2005.
Sec. 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, Sec. 2, eff. April 1,
2005.
Sec. 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, Sec. 2, eff. April 1,
2005.
Sec. 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, Sec. 2, eff. April 1,
2005.
SUBCHAPTER B. LIENHOLDER APPROVAL OF INSURANCE CLAIM PAYMENT
RELATING TO PERSONAL PROPERTY
Sec. 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, Sec. 2, eff. April 1,
2005.
Sec. 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, Sec. 2, eff. April 1,
2005.