Section 0780-01-18-.01 - PROPERTY INSURANCE ON COLLATERAL ON LOANS IN GENERAL(1) Prior to any formal application for the loan or payment of any fees or costs required with the filing of an application, the lender must inform the borrower of his legal rights regarding the placing of insurance.(2) Notice must be given to said borrower in a clear and concise statement, in writing, with a copy of said statement to be signed by the borrower and retained by the lender. Nothing in these rules shall be construed to mean that this statement must be a part of the mortgage contract, note or disclosure statement.(3) The borrower shall have the right to submit to the lender a list containing a reasonable choice of agents and/or insurers selected by the borrower, who will write the insurance in connection with the loan. The number of agencies comprising a "reasonable choice" shall be construed to be a minimum of three (3) agents and/or insurers. The lender has the right to refuse insurance policies written by agents not located within the trade area normally served by the lender.(4) The lender may prescribe reasonable requirements regarding the financial structure and stability of the company. In prescribing these requirements, the adequacy of the insurance coverage provided by an insurance company may be taken into consideration.(5) If the insurance submitted by the borrower is acceptable to the lender, the borrower must have available on the day of the closing of the loan and at the time specified by the lender, the policy (or acceptable binder) and coverage agreed upon.(6) If the policy is cancelled by the insurer, the borrower must have a new policy, acceptable to the lender, in the hands of the lender not less than thirty-six (36) hours before the expiration date stated in the notice of cancellation to the insured.(7) In the event the mortgage is transferred by the original mortgagee to another institution or party during the term of the insurance contract, the insurance coverage shall not be cancelled except by mutual agreement of the borrower and the lender, upon full notice to the borrower, of his rights and powers, and of any expense or penalty charge which he may experience as a result of any such transfer of insurance coverage during such term.(8) Complaints of coercion filed with the Insurance Commissioner must be in the form of a written statement signed by the borrower. Complaints from insurance agents must be accompanied by a written statement signed by the borrower.(9) Any requirements adopted by the lender pursuant to these rules shall be filed with the Insurance Commissioner and such requirements shall be made available to the borrower, insurance companies and agents. The Insurance Commissioner shall treat such requirements, when filed, as public records, making such available to interested parties upon request.(10) Renewals: (a) The agent shall deliver a renewal policy or a renewal certificate to the lender at least ten (10) days prior to the expiration date of the policy in force, if required by the lender.(b) In cases where the borrower desires to change insurance agents or insurers, the agent writing the renewal business must file with the lender a letter of authorization signed by the borrower, which shall be accepted by the lender in good faith.(c) Where a change of agent is involved in the renewal of a policy, the lender shall notify the agent renewing the insurance and the borrower, in writing, within five (5) business days after tender of the renewal policy if said policy is not acceptable to the lender.(d) Notice of Intention Not to Renew: In the event the company does not intend to renew the contract, it shall mail or deliver to the named insured at the address shown in the policy not less than twenty (20) days' notice of its intention not to renew.(11) Cancellations and Refunds: (a) The purchaser or borrower shall be promptly notified in writing of the cancellation of, or change in, the policy, in accordance with the standard ten (10) day advance cancellation notice as contained in the policy. If through payment in advance by the purchaser or borrower of the remaining undue installments or if the indebtedness is discharged in any manner prior to its maturity date, thereby terminating the insurance coverage, the unearned portion of the insurance premium and interest charged thereon, if any, shall be refunded as soon as practicable after the cancellation becomes effective, however, refunds calculated at less than one dollar ($1.00) need not be made.Tenn. Comp. R. & Regs. 0780-01-18-.01
Original rule certified June 10, 1974. Amended: Filed August 5, 1974; Effective September 4, 1974.Authority: T.C.A. §45-2011.