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1 | AN ACT concerning insurance.
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2 | Be it enacted by the People of the State of Illinois,
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3 | represented in the General Assembly:
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4 | Section 5. The Title Insurance Act is amended by changing | ||||||
5 | Sections 3 and 16 and by adding Section 16.1 as follows:
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6 | (215 ILCS 155/3) (from Ch. 73, par. 1403)
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7 | Sec. 3. As used in this Act, the words and phrases | ||||||
8 | following shall
have the following meanings unless the context | ||||||
9 | requires otherwise:
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10 | (1) "Title insurance business" or "business of title | ||||||
11 | insurance" means:
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12 | (A) Issuing as insurer or offering to issue as insurer | ||||||
13 | title insurance;
and
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14 | (B) Transacting or proposing to transact one or more of | ||||||
15 | the following
activities when
conducted or performed in | ||||||
16 | contemplation of or in conjunction with the issuance
of | ||||||
17 | title insurance;
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18 | (i) soliciting or negotiating the issuance of | ||||||
19 | title insurance;
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20 | (ii) guaranteeing, warranting, or otherwise | ||||||
21 | insuring the correctness of
title
searches for all | ||||||
22 | instruments affecting titles to real property, any | ||||||
23 | interest in
real property, cooperative units and |
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1 | proprietary leases, and for all liens or
charges | ||||||
2 | affecting the same;
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3 | (iii) handling of escrows, settlements, or | ||||||
4 | closings;
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5 | (iv) executing title insurance policies;
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6 | (v) effecting contracts of reinsurance;
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7 | (vi) abstracting, searching, or examining titles; | ||||||
8 | or
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9 | (vii) issuing insured closing letters or closing | ||||||
10 | protection letters;
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11 | (C) Guaranteeing, warranting, or insuring searches or | ||||||
12 | examinations of
title to real property or any interest in | ||||||
13 | real property, with the exception of
preparing an | ||||||
14 | attorney's opinion of title; or
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15 | (D) Guaranteeing or warranting the status of title as | ||||||
16 | to ownership of or
liens on real property and personal | ||||||
17 | property by any person other than the
principals to the | ||||||
18 | transaction; or
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19 | (E) Doing or proposing to do any business substantially | ||||||
20 | equivalent to any
of the activities listed in this | ||||||
21 | subsection,
provided that the preparation of an attorney's | ||||||
22 | opinion
of title pursuant to paragraph (1)(C) is not | ||||||
23 | intended to be within the
definition of "title insurance | ||||||
24 | business" or "business of title insurance".
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25 | (1.5) "Title insurance" means insuring, guaranteeing, | ||||||
26 | warranting, or
indemnifying owners of real or personal property |
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1 | or the holders of liens or
encumbrances thereon or others | ||||||
2 | interested therein against loss or damage
suffered by reason of | ||||||
3 | liens, encumbrances upon, defects in, or the
unmarketability of | ||||||
4 | the title to the property; the invalidity or
unenforceability | ||||||
5 | of any liens or encumbrances thereon; or doing any business in
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6 | substance equivalent to any of the foregoing.
"Warranting" for | ||||||
7 | purpose of this provision shall not
include any warranty | ||||||
8 | contained in instruments of encumbrance or conveyance.
Title | ||||||
9 | insurance is a single line form of insurance, also known as | ||||||
10 | monoline. An attorney's opinion of title pursuant to paragraph | ||||||
11 | (1)(C) is not intended to
be within the definition of "title | ||||||
12 | insurance".
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13 | (2) "Title insurance company" means any domestic company | ||||||
14 | organized under
the laws of this State for the purpose of | ||||||
15 | conducting the business of
title insurance and any title | ||||||
16 | insurance
company organized under the laws of another State, | ||||||
17 | the District of Columbia
or foreign government and authorized | ||||||
18 | to transact the business of
title insurance in this State.
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19 | (3) "Title insurance agent" means a person, firm, | ||||||
20 | partnership,
association, corporation or other legal entity | ||||||
21 | registered by a title
insurance company and authorized by such | ||||||
22 | company to determine insurability
of title in accordance with | ||||||
23 | generally acceptable underwriting rules and
standards in | ||||||
24 | reliance on either the public records or a search package
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25 | prepared from a title plant, or both, and authorized by such | ||||||
26 | title insurance company in addition to do any
of the following: |
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1 | act as an escrow agent pursuant to subsections (f), (g), and | ||||||
2 | (h) of Section 16 of this Act , solicit title insurance, collect
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3 | premiums, or issue title insurance commitments reports , | ||||||
4 | binders or commitments to insure and
policies , and endorsements | ||||||
5 | of the title insurance company; in its behalf, provided, | ||||||
6 | however, the term "title insurance agent"
shall not include | ||||||
7 | officers and salaried employees of any title insurance
company.
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8 | (4) "Producer of title business" is any person, firm, | ||||||
9 | partnership,
association, corporation or other legal entity | ||||||
10 | engaged in this State in the
trade, business, occupation or | ||||||
11 | profession of (i) buying or selling
interests in real property, | ||||||
12 | (ii) making loans secured by interests in real
property, or | ||||||
13 | (iii) acting as broker, agent, attorney, or representative of
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14 | natural persons or other legal entities that buy or sell | ||||||
15 | interests in real
property or that lend money with such | ||||||
16 | interests as security.
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17 | (5) "Associate" is any firm, association, partnership, | ||||||
18 | corporation or
other legal entity organized for profit in which | ||||||
19 | a producer of title
business is a director, officer, or partner | ||||||
20 | thereof, or owner of a
financial interest, as defined herein, | ||||||
21 | in such entity; any legal entity
that controls, is controlled | ||||||
22 | by, or is under common control with a producer
of title | ||||||
23 | business; and any natural person or legal entity with whom a
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24 | producer of title business has any agreement, arrangement, or | ||||||
25 | understanding
or pursues any course of conduct the purpose of | ||||||
26 | which is to evade the
provisions of this Act.
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1 | (6) "Financial interest" is any ownership interest, legal | ||||||
2 | or beneficial,
except ownership of publicly traded stock.
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3 | (7) "Refer" means to place or cause to be placed, or to | ||||||
4 | exercise any
power or influence over the placing of title | ||||||
5 | business, whether or not the
consent or approval of any other | ||||||
6 | person is sought or obtained with respect
to the referral.
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7 | (8) "Escrow Agent" means any title insurance company or any | ||||||
8 | title
insurance agent, including independent contractors of | ||||||
9 | either, acting on behalf of a title insurance company which
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10 | receives deposits, in trust, of funds or documents, or both, | ||||||
11 | for the purpose
of effecting the sale, transfer, encumbrance or | ||||||
12 | lease of real property to
be held by such escrow agent until | ||||||
13 | title to the real property that is the
subject of the escrow is | ||||||
14 | in a prescribed condition. An escrow agent conducting closings | ||||||
15 | shall be subject to the provisions of paragraphs (1) through | ||||||
16 | (4) of subsection (e) of Section 16 of this Act.
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17 | (9) "Independent Escrowee" means any firm, person, | ||||||
18 | partnership,
association, corporation or other
legal entity, | ||||||
19 | other than a title insurance company or a title insurance
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20 | agent, which receives deposits, in trust, of funds or | ||||||
21 | documents, or both, for
the purpose of effecting the sale, | ||||||
22 | transfer, encumbrance or lease of real
property to be held by | ||||||
23 | such escrowee until title to the real property that
is the | ||||||
24 | subject of the escrow is in a prescribed condition. Federal and
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25 | State chartered banks, savings and loan associations, credit | ||||||
26 | unions,
mortgage bankers, banks or trust companies authorized |
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1 | to do business under
the Illinois Corporate Fiduciary Act, | ||||||
2 | licensees under the Consumer
Installment Loan Act, real estate | ||||||
3 | brokers licensed pursuant to the Real
Estate License Act of | ||||||
4 | 2000, as such Acts are now or hereafter amended, and
licensed | ||||||
5 | attorneys when engaged in the attorney-client relationship are
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6 | exempt from the escrow provisions of this Act. "Independent | ||||||
7 | Escrowee" does not include employees or independent | ||||||
8 | contractors of a title insurance company or title insurance | ||||||
9 | agent authorized by a title insurance company to perform | ||||||
10 | closing, escrow, or settlement services.
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11 | (10) "Single risk" means the insured amount of any title | ||||||
12 | insurance
policy, except that where 2 or more title insurance | ||||||
13 | policies are issued
simultaneously covering different estates | ||||||
14 | in the same real property, "single
risk" means the sum of the | ||||||
15 | insured amounts of all such title insurance
policies. Any title | ||||||
16 | insurance policy insuring a mortgage interest, a claim
payment | ||||||
17 | under which reduces the insured amount of a fee or leasehold | ||||||
18 | title
insurance policy, shall be excluded in computing the | ||||||
19 | amount of a single
risk to the extent that the insured amount | ||||||
20 | of the mortgage title insurance
policy does not exceed the | ||||||
21 | insured amount of the fee or leasehold title
insurance policy.
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22 | (11) "Department" means the Department of Financial and | ||||||
23 | Professional Regulation.
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24 | (12) "Secretary" means the Secretary
of Financial and | ||||||
25 | Professional Regulation.
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26 | (13) "Insured closing letter" or "closing protection |
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1 | letter" means
an indemnification or undertaking to a party to a | ||||||
2 | real estate transaction, from
a principal such as a title | ||||||
3 | insurance company or similar entity, setting forth
in writing | ||||||
4 | the extent of the principal's responsibility for intentional
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5 | misconduct or errors in closing the real estate transaction on | ||||||
6 | the part of a
settlement agent, such as a title insurance agent | ||||||
7 | or other settlement service
provider.
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8 | (14) "Residential real property" means a building or | ||||||
9 | buildings consisting of one to 4 residential units or a | ||||||
10 | residential condominium unit where at least one of the | ||||||
11 | residential units or condominium units is occupied or intended | ||||||
12 | to be occupied as a residence by the purchaser or borrower, or | ||||||
13 | in the event that the purchaser or borrower is the trustee of a | ||||||
14 | trust, by a beneficiary of that trust.
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15 | (Source: P.A. 94-893, eff. 6-20-06; 95-570, eff. 8-31-07.)
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16 | (215 ILCS 155/16) (from Ch. 73, par. 1416)
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17 | Sec. 16. Title insurance agents.
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18 | (a) No person, firm, partnership, association, corporation | ||||||
19 | or other
legal entity shall act as or hold itself out to be a | ||||||
20 | title insurance agent
unless duly registered by a title | ||||||
21 | insurance company with the Secretary.
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22 | (b) Each application for registration shall be made on a | ||||||
23 | form specified
by the Secretary and prepared in duplicate by | ||||||
24 | each title insurance company
which the agent represents. The | ||||||
25 | title insurance company shall retain the
copy of the |
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1 | application and forward the original to the Secretary with the
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2 | appropriate fee.
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3 | (c) Every applicant for registration, except a firm, | ||||||
4 | partnership,
association or corporation, must be 18 years or | ||||||
5 | more of age.
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6 | (d) Registration shall be made annually by a filing with | ||||||
7 | the Secretary;
supplemental registrations for new title | ||||||
8 | insurance agents to be added
between annual filings shall be | ||||||
9 | made from time to time in the manner
provided by the Secretary; | ||||||
10 | registrations shall remain in effect unless
revoked or | ||||||
11 | suspended by the Secretary or
voluntarily withdrawn by the
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12 | registrant or the title insurance company.
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13 | (e) Funds deposited in connection with any escrows, | ||||||
14 | settlements, or closings shall be deposited in a separate | ||||||
15 | fiduciary trust account or accounts in a bank or other | ||||||
16 | financial institution insured by an agency of the federal | ||||||
17 | government unless the instructions provide otherwise. The | ||||||
18 | funds shall be the property of the person or persons entitled | ||||||
19 | thereto under the provisions of the escrow, settlement, or | ||||||
20 | closing and shall be segregated by escrow, settlement, or | ||||||
21 | closing in the records of the escrow agent. The funds shall not | ||||||
22 | be subject to any debts of the escrowee and shall be used only | ||||||
23 | in accordance with the terms of the individual escrow, | ||||||
24 | settlement, or closing under which the funds were accepted. | ||||||
25 | Interest received on funds deposited with the escrow agent | ||||||
26 | in connection with any escrow, settlement, or closing shall be |
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1 | paid to the depositing party unless the instructions provide | ||||||
2 | otherwise. | ||||||
3 | The escrow agent shall maintain separate records of all | ||||||
4 | receipts and disbursements of escrow, settlement, or closing | ||||||
5 | funds. | ||||||
6 | The escrow agent shall comply with any rules adopted by the | ||||||
7 | Secretary pertaining to escrow, settlement, or closing | ||||||
8 | transactions. | ||||||
9 | (f) A title insurance agent shall not act as an escrow | ||||||
10 | agent in a nonresidential real property transaction where the | ||||||
11 | amount of settlement funds on deposit with the escrow agent is | ||||||
12 | less than $2,000,000 or in a residential real property | ||||||
13 | transaction unless the title insurance agent, title insurance | ||||||
14 | company, or another authorized title insurance agent has | ||||||
15 | committed for the issuance of title insurance in that | ||||||
16 | transaction and the title insurance agent is authorized to act | ||||||
17 | as an escrow agent on behalf of the title insurance company for | ||||||
18 | which the commitment for title insurance has been issued. The | ||||||
19 | authorization under the preceding sentence shall be given | ||||||
20 | either (1) by an agency contract with the title insurance | ||||||
21 | company which contract, in compliance with the requirements set | ||||||
22 | forth in subsection (g) of this Section, authorizes the title | ||||||
23 | insurance agent to act as an escrow agent on behalf of the | ||||||
24 | title insurance company or (2) by a closing protection letter | ||||||
25 | in compliance with the requirements set forth in Section 16.1 | ||||||
26 | of this Act, issued by the title insurance company to the |
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1 | seller, buyer, borrower, and lender. A closing protection | ||||||
2 | letter shall not be issued by a title insurance agent. The | ||||||
3 | provisions of this subsection (f) shall not apply to the | ||||||
4 | authority of a title insurance agent to act as an escrow agent | ||||||
5 | under subsection (g) of Section 17 of this Act. | ||||||
6 | (g) If an agency contract between the title insurance | ||||||
7 | company and the title insurance agent is the source of the | ||||||
8 | authority under subsection (f) of this Section for a title | ||||||
9 | insurance agent to act as escrow agent for a real property | ||||||
10 | transaction, then the agency contract shall provide for no less | ||||||
11 | protection from the title insurance company to all parties to | ||||||
12 | the real property transaction than the title insurance company | ||||||
13 | would have provided to those parties had the title insurance | ||||||
14 | company issued a closing protection letter in conformity with | ||||||
15 | Section 16.1 of this Act. | ||||||
16 | (h) A title insurance company shall be liable for the acts | ||||||
17 | or omissions of its title insurance agent as an escrow agent if | ||||||
18 | the title insurance company has authorized the title insurance | ||||||
19 | agent under subsections (f) and (g) of this Section 16 and only | ||||||
20 | to the extent of the liability undertaken by the title | ||||||
21 | insurance company in the agency agreement or closing protection | ||||||
22 | letter. The liability, if any, of the title insurance agent to | ||||||
23 | the title insurance company for acts and omissions of the title | ||||||
24 | insurance agent as an escrow agent shall not be limited or | ||||||
25 | otherwise modified because the title insurance company has | ||||||
26 | provided closing protection to a party or parties to a real |
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1 | property transaction escrow, settlement, or closing. The | ||||||
2 | escrow agent shall not charge a fee for protection provided by | ||||||
3 | a title insurance company to parties to real property | ||||||
4 | transactions under subsections (f) and (g) of this Section 16 | ||||||
5 | and Section 16.1, but shall collect from the parties the fee | ||||||
6 | charged by the title insurance company under Section 16.1 of | ||||||
7 | this Act and shall promptly remit the fee to the title | ||||||
8 | insurance company. The title insurance company may charge the | ||||||
9 | parties a reasonable fee for protection provided pursuant to | ||||||
10 | subsections (f) and (g) of this Section 16 and shall not pay | ||||||
11 | any portion of the fee to the escrow agent. The payment of any | ||||||
12 | portion of the fee to the escrow agent by the title insurance | ||||||
13 | company, shall be deemed a prohibited inducement or | ||||||
14 | compensation in violation of Section 24 of this Act. | ||||||
15 | (Source: P.A. 94-893, eff. 6-20-06.)
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16 | (215 ILCS 155/16.1 new) | ||||||
17 | Sec. 16.1. Closing or settlement protection. | ||||||
18 | (a) Notwithstanding the provisions of item (iii) of | ||||||
19 | paragraph (B) of subsection (1) and subsections (3) and (8) of | ||||||
20 | Section 3 and Section 16 of this Act, a title insurance company | ||||||
21 | or title insurance agent is not authorized to act as an escrow | ||||||
22 | agent in a nonresidential real property transaction where the | ||||||
23 | amount of settlement funds on deposit with the escrow agent is | ||||||
24 | less than $2,000,000 or in a residential real property | ||||||
25 | transaction unless as part of the same transaction a |
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1 | commitment, binder, or title insurance policy and closing | ||||||
2 | protection letters protecting the buyer's or borrower's, | ||||||
3 | lender's, and seller's interests have been issued by the title | ||||||
4 | insurance company on whose behalf the commitment, binder, or | ||||||
5 | title insurance policy has been issued. Closing protection | ||||||
6 | letters are not required when the authorization for the title | ||||||
7 | insurance agent to act as an escrow agent is given by an agency | ||||||
8 | contract with the title insurance company pursuant to | ||||||
9 | subsections (f), (g), and (h) of Section 16 of this Act, but | ||||||
10 | shall be issued by the title insurance company upon the request | ||||||
11 | of a party to a nonresidential real property transaction where | ||||||
12 | the amount of settlement funds on deposit with the escrow agent | ||||||
13 | is less than $2,000,000 or in a residential real property | ||||||
14 | transaction. | ||||||
15 | (b) Unless otherwise agreed to between a title insurance | ||||||
16 | company and a protected person or entity, a closing protection | ||||||
17 | letter under this Section shall indemnify all parties to a real | ||||||
18 | property transaction against actual loss, not to exceed the | ||||||
19 | amount of the settlement funds deposited with the escrow agent. | ||||||
20 | The closing protection letter shall in any event indemnify all | ||||||
21 | parties to a real property transaction when such losses arise | ||||||
22 | out of: | ||||||
23 | (1) failure of the escrow agent to comply with written | ||||||
24 | closing instructions to the extent that they relate to (A) | ||||||
25 | the status of the title to an interest in land or the | ||||||
26 | validity, enforceability, and priority of the lien of a |
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1 | mortgage on an interest in land, including the obtaining of | ||||||
2 | documents and the disbursement of funds necessary to | ||||||
3 | establish the status of title or lien or (B) the obtaining | ||||||
4 | of any other document specifically required by a party to | ||||||
5 | the real property transaction, but only to the extent that | ||||||
6 | the failure to obtain such other document affects the | ||||||
7 | status of the title to an interest in land or the validity, | ||||||
8 | enforceability, and priority of the lien of a mortgage on | ||||||
9 | an interest in land; or | ||||||
10 | (2) fraud, dishonesty, or negligence of the escrow | ||||||
11 | agent in handling funds or documents in connection with | ||||||
12 | closings to the extent that the fraud, dishonesty, or | ||||||
13 | negligence relates to the status of the title to the | ||||||
14 | interest in land or to the validity, enforceability, and | ||||||
15 | priority of the lien of a mortgage on an interest in land | ||||||
16 | or, in the case of a seller, to the extent that the fraud, | ||||||
17 | dishonesty, or negligence relates to funds paid to or on | ||||||
18 | behalf of, or which should have been paid to or on behalf | ||||||
19 | of, the seller. | ||||||
20 | (c) The indemnification under a closing protection letter | ||||||
21 | may include limitations on the liability of the title insurance | ||||||
22 | company for any of the following: | ||||||
23 | (1) Failure of the escrow agent to comply with closing | ||||||
24 | instructions that require title insurance protection | ||||||
25 | inconsistent with that set forth in the title insurance | ||||||
26 | commitment for the real property transaction. Instructions |
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1 | that require the removal of specific exceptions to title or | ||||||
2 | compliance with the requirements contained in the title | ||||||
3 | insurance commitment shall not be deemed to be | ||||||
4 | inconsistent. | ||||||
5 | (2) Loss or impairment of funds in the course of | ||||||
6 | collection or while on deposit with a bank due to bank | ||||||
7 | failure, insolvency, or suspension, except such as shall | ||||||
8 | result from failure of the escrow agent closer to comply | ||||||
9 | with written closing instructions to deposit the funds in a | ||||||
10 | bank that is designated by name by a party to the real | ||||||
11 | property transaction. | ||||||
12 | (3) Mechanics' and materialmen's liens in connection | ||||||
13 | with sale, purchase, lease, or construction loan | ||||||
14 | transactions, except to the extent that protection against | ||||||
15 | such liens is afforded by a title insurance commitment or | ||||||
16 | policy issued by the escrow agent. | ||||||
17 | (4) Failure of the escrow agent to comply with written | ||||||
18 | closing instructions to the extent that such instructions | ||||||
19 | require a determination by the escrow agent of the | ||||||
20 | validity, enforceability, or effectiveness of any document | ||||||
21 | described in subitem (B) of item (1) of subsection (b) of | ||||||
22 | this Section. | ||||||
23 | (5) Fraud, dishonesty, or negligence of an employee, | ||||||
24 | agent, attorney, or broker, who is not also the escrow | ||||||
25 | agent or an independent contract closer of the escrow | ||||||
26 | agent, of the indemnified party to the real property |
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1 | transaction. | ||||||
2 | (6) The settlement or release of any claim by the | ||||||
3 | indemnified party to the real property transaction without | ||||||
4 | the written consent of the title insurance company. | ||||||
5 | (7) Any matters created, suffered, assumed, or agreed | ||||||
6 | to by, or known to, the indemnified party to the real | ||||||
7 | property transaction without the written consent of the | ||||||
8 | title insurance company. | ||||||
9 | The closing protection letter may also include reasonable | ||||||
10 | additional provisions concerning the dollar amount of | ||||||
11 | protection, provided such limit is not less than the amount | ||||||
12 | deposited with the escrow agent, arbitration, subrogation, | ||||||
13 | claim notices, and other conditions and limitations that do not | ||||||
14 | materially impair the protection required by this Section 16.1. | ||||||
15 | (d) The entire fee for the closing protection letter shall | ||||||
16 | be remitted by the title insurance agent to the title insurance | ||||||
17 | company. Title insurance agents shall not charge the parties | ||||||
18 | any additional amount for closing protection letters issued | ||||||
19 | under this Section. | ||||||
20 | (e) This Section shall not apply to the authority of a | ||||||
21 | title insurance company and title insurance agent to act as an | ||||||
22 | escrow agent under subsection (g) of Section 17 of this Act.
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