Full Text of SB2738 99th General Assembly
SB2738 99TH GENERAL ASSEMBLY |
| | 99TH GENERAL ASSEMBLY
State of Illinois
2015 and 2016 SB2738 Introduced 2/16/2016, by Sen. John G. Mulroe SYNOPSIS AS INTRODUCED: |
| 215 ILCS 155/3 | from Ch. 73, par. 1403 | 215 ILCS 155/16 | from Ch. 73, par. 1416 | 215 ILCS 155/17 | from Ch. 73, par. 1417 |
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Amends the Title Insurance Act. Makes changes in the definition of "insured closing letter" or "closing protection letter". Provides that a closing protection letter shall not be issued by any person or entity (including an independent escrowee) other than a title insurance company. Effective immediately.
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| | A BILL FOR |
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| 1 | | AN ACT concerning regulation.
| 2 | | Be it enacted by the People of the State of Illinois,
| 3 | | represented in the General Assembly:
| 4 | | Section 5. The Title Insurance Act is amended by changing | 5 | | Sections 3 and 16 and adding Section 17 as follows:
| 6 | | (215 ILCS 155/3) (from Ch. 73, par. 1403)
| 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:
| 10 | | (1) "Title insurance business" or "business of title | 11 | | insurance" means:
| 12 | | (A) Issuing as insurer or offering to issue as insurer | 13 | | title insurance;
and
| 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;
| 18 | | (i) soliciting or negotiating the issuance of | 19 | | title insurance;
| 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;
| 3 | | (iii) handling of escrows, settlements, or | 4 | | closings;
| 5 | | (iv) executing title insurance policies;
| 6 | | (v) effecting contracts of reinsurance;
| 7 | | (vi) abstracting, searching, or examining titles; | 8 | | or
| 9 | | (vii) issuing insured closing letters or closing | 10 | | protection letters;
| 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
| 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
| 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".
| 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
| 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".
| 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.
| 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
| 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
| 3 | | premiums, or issue title insurance commitments,
policies, and | 4 | | endorsements of the title insurance company; provided, | 5 | | however, the term "title insurance agent"
shall not include | 6 | | officers and salaried employees of any title insurance
company.
| 7 | | (4) "Producer of title business" is any person, firm, | 8 | | partnership,
association, corporation or other legal entity | 9 | | engaged in this State in the
trade, business, occupation or | 10 | | profession of (i) buying or selling
interests in real property, | 11 | | (ii) making loans secured by interests in real
property, or | 12 | | (iii) acting as broker, agent, attorney, or representative of
| 13 | | natural persons or other legal entities that buy or sell | 14 | | interests in real
property or that lend money with such | 15 | | interests as security.
| 16 | | (5) "Associate" is any firm, association, partnership, | 17 | | corporation or
other legal entity organized for profit in which | 18 | | a producer of title
business is a director, officer, or partner | 19 | | thereof, or owner of a
financial interest, as defined herein, | 20 | | in such entity; any legal entity
that controls, is controlled | 21 | | by, or is under common control with a producer
of title | 22 | | business; and any natural person or legal entity with whom a
| 23 | | producer of title business has any agreement, arrangement, or | 24 | | understanding
or pursues any course of conduct the purpose of | 25 | | which is to evade the
provisions of this Act.
| 26 | | (6) "Financial interest" is any ownership interest, legal |
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| 1 | | or beneficial,
except ownership of publicly traded stock.
| 2 | | (7) "Refer" means to place or cause to be placed, or to | 3 | | exercise any
power or influence over the placing of title | 4 | | business, whether or not the
consent or approval of any other | 5 | | person is sought or obtained with respect
to the referral.
| 6 | | (8) "Escrow Agent" means any title insurance company or any | 7 | | title
insurance agent, including independent contractors of | 8 | | either, acting on behalf of a title insurance company, which
| 9 | | receives deposits, in trust, of funds or documents, or both, | 10 | | for the purpose
of effecting the sale, transfer, encumbrance or | 11 | | lease of real property to
be held by such escrow agent until | 12 | | title to the real property that is the
subject of the escrow is | 13 | | in a prescribed condition. An escrow agent conducting closings | 14 | | shall be subject to the provisions of paragraphs (1) through | 15 | | (4) of subsection (e) of Section 16 of this Act.
| 16 | | (9) "Independent Escrowee" means any firm, person, | 17 | | partnership,
association, corporation or other
legal entity, | 18 | | other than a title insurance company or a title insurance
| 19 | | agent, which receives deposits, in trust, of funds or | 20 | | documents, or both, for
the purpose of effecting the sale, | 21 | | transfer, encumbrance or lease of real
property to be held by | 22 | | such escrowee until title to the real property that
is the | 23 | | subject of the escrow is in a prescribed condition. Federal and
| 24 | | State chartered banks, savings and loan associations, credit | 25 | | unions,
mortgage bankers, banks or trust companies authorized | 26 | | to do business under
the Illinois Corporate Fiduciary Act, |
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| 1 | | licensees under the Consumer
Installment Loan Act, real estate | 2 | | brokers licensed pursuant to the Real
Estate License Act of | 3 | | 2000, as such Acts are now or hereafter amended, and
licensed | 4 | | attorneys when engaged in the attorney-client relationship are
| 5 | | exempt from the escrow provisions of this Act. "Independent | 6 | | Escrowee" does not include employees or independent | 7 | | contractors of a title insurance company or title insurance | 8 | | agent authorized by a title insurance company to perform | 9 | | closing, escrow, or settlement services.
| 10 | | (10) "Single risk" means the insured amount of any title | 11 | | insurance
policy, except that where 2 or more title insurance | 12 | | policies are issued
simultaneously covering different estates | 13 | | in the same real property, "single
risk" means the sum of the | 14 | | insured amounts of all such title insurance
policies. Any title | 15 | | insurance policy insuring a mortgage interest, a claim
payment | 16 | | under which reduces the insured amount of a fee or leasehold | 17 | | title
insurance policy, shall be excluded in computing the | 18 | | amount of a single
risk to the extent that the insured amount | 19 | | of the mortgage title insurance
policy does not exceed the | 20 | | insured amount of the fee or leasehold title
insurance policy.
| 21 | | (11) "Department" means the Department of Financial and | 22 | | Professional Regulation.
| 23 | | (12) "Secretary" means the Secretary
of Financial and | 24 | | Professional Regulation.
| 25 | | (13) "Insured closing letter" or "closing protection | 26 | | letter" means
an indemnification or undertaking to a party to a |
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| 1 | | real property transaction, from
a principal such as a title | 2 | | insurance company, setting forth
in writing the extent of the | 3 | | title insurance company's principal's responsibility for | 4 | | intentional
misconduct or errors in closing the real property | 5 | | transaction on the part of a
settlement agent, such as a title | 6 | | insurance agent or other settlement service
provider, and | 7 | | includes protection afforded pursuant to subsections (f), (g), | 8 | | and (h) of Section 16 and Section 16.1 of this Act even if such | 9 | | protection is afforded by contract.
| 10 | | (14) "Residential real property" means a building or | 11 | | buildings consisting of one to 4 residential units or a | 12 | | residential condominium unit where at least one of the | 13 | | residential units or condominium units is occupied or intended | 14 | | to be occupied as a residence by the purchaser or borrower, or | 15 | | in the event that the purchaser or borrower is the trustee of a | 16 | | trust, by a beneficiary of that trust.
| 17 | | (15) "Financial institution" means any bank subject to the | 18 | | Illinois Banking Act, any savings and loan association subject | 19 | | to the Illinois Savings and Loan Act of 1985, any savings bank | 20 | | subject to the Savings Bank Act, any credit union subject to | 21 | | the Illinois Credit Union Act, and any federally chartered | 22 | | commercial bank, savings and loan association, savings bank, or | 23 | | credit union organized and operated in this State pursuant to | 24 | | the laws of the United States. | 25 | | (Source: P.A. 98-387, eff. 8-16-13.)
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| 1 | | (215 ILCS 155/16) (from Ch. 73, par. 1416)
| 2 | | Sec. 16. Title insurance agents.
| 3 | | (a) No person, firm, partnership, association, corporation | 4 | | or other
legal entity shall act as or hold itself out to be a | 5 | | title insurance agent
unless duly registered by a title | 6 | | insurance company with the Secretary.
| 7 | | (b) Each application for registration shall be made on a | 8 | | form specified
by the Secretary and prepared by each title | 9 | | insurance company
which the agent represents. The title | 10 | | insurance company shall retain the
copy of the application and | 11 | | forward a copy to the Secretary.
| 12 | | (c) Every applicant for registration, except a firm, | 13 | | partnership,
association, limited liability company, or | 14 | | corporation, must be 18 years or more of age. Included in every | 15 | | application for registration of a title insurance agent, | 16 | | including a firm, partnership,
association, limited liability | 17 | | company, or corporation, shall be an affidavit of the applicant | 18 | | title insurance agent, signed and notarized in front
of a | 19 | | notary public, affirming that the applicant and every owner, | 20 | | officer, director, principal, member, or
manager of the | 21 | | applicant has never been convicted or pled guilty to any felony | 22 | | or misdemeanor involving a crime of
theft or dishonesty or | 23 | | otherwise accurately disclosing any such felony or misdemeanor | 24 | | involving a crime of
theft or dishonesty. No person who has had | 25 | | a conviction or pled guilty to any felony or
misdemeanor | 26 | | involving theft or dishonesty may be registered by a title |
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| 1 | | insurance company without a written notification to the | 2 | | Secretary disclosing the conviction or plea, and no such
person | 3 | | may serve as an owner, officer, director, principal, or manager | 4 | | of any registered title insurance
agent without the written | 5 | | permission of the Secretary.
| 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
| 12 | | registrant or the title insurance company.
| 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 , an | 3 | | independent escrowee, or any other person or entity other than | 4 | | a title insurance company . The provisions of this subsection | 5 | | (f) shall not apply to the authority of a title insurance agent | 6 | | to act as an escrow agent under subsection (g) of Section 17 of | 7 | | this Act. | 8 | | (g) If an agency contract between the title insurance | 9 | | company and the title insurance agent is the source of the | 10 | | authority under subsection (f) of this Section for a title | 11 | | insurance agent to act as escrow agent for a real property | 12 | | transaction, then the agency contract shall provide for no less | 13 | | protection from the title insurance company to all parties to | 14 | | the real property transaction than the title insurance company | 15 | | would have provided to those parties had the title insurance | 16 | | company issued a closing protection letter in conformity with | 17 | | Section 16.1 of this Act. | 18 | | (h) A title insurance company shall be liable for the acts | 19 | | or omissions of its title insurance agent as an escrow agent if | 20 | | the title insurance company has authorized the title insurance | 21 | | agent under subsections (f) and (g) of this Section 16 and only | 22 | | to the extent of the liability undertaken by the title | 23 | | insurance company in the agency agreement or closing protection | 24 | | letter. The liability, if any, of the title insurance agent to | 25 | | the title insurance company for acts and omissions of the title | 26 | | insurance agent as an escrow agent shall not be limited or |
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| 1 | | otherwise modified because the title insurance company has | 2 | | provided closing protection to a party or parties to a real | 3 | | property transaction escrow, settlement, or closing. The | 4 | | escrow agent shall not charge a fee for protection provided by | 5 | | a title insurance company to parties to real property | 6 | | transactions under subsections (f) and (g) of this Section 16 | 7 | | and Section 16.1, but shall collect from the parties the fee | 8 | | charged by the title insurance company and shall promptly remit | 9 | | the fee to the title insurance company. The title insurance | 10 | | company may charge the parties a reasonable fee for protection | 11 | | provided pursuant to subsections (f) and (g) of this Section 16 | 12 | | and Section 16.1 and shall not pay any portion of the fee to | 13 | | the escrow agent. The payment of any portion of the fee to the | 14 | | escrow agent by the title insurance company, shall be deemed a | 15 | | prohibited inducement or compensation in violation of Section | 16 | | 24 of this Act. | 17 | | (i) The Secretary shall adopt and amend such rules as may | 18 | | be required for the proper administration and enforcement of | 19 | | this Section 16 consistent with the federal Real Estate | 20 | | Settlement Procedures Act and Section 24 of this Act. | 21 | | (Source: P.A. 98-398, eff. 1-1-14; 98-832, eff. 1-1-15; 99-104, | 22 | | eff. 1-1-16 .)
| 23 | | (215 ILCS 155/17) (from Ch. 73, par. 1417)
| 24 | | Sec. 17. Independent escrowees.
| 25 | | (a)
Every independent escrowee shall be subject to the same
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| 1 | | certification and deposit requirements to which title | 2 | | insurance companies
are subject under Section 4 of this Act.
| 3 | | (b) No person, firm, corporation or other legal entity | 4 | | shall hold itself
out to be an independent escrowee unless it | 5 | | has been issued a certificate
of authority by the Secretary.
| 6 | | (c) Every applicant for a certificate of authority, except | 7 | | a firm,
partnership, association or corporation, must be 18 | 8 | | years or more of age.
| 9 | | (d) Every certificate of authority shall remain in effect | 10 | | one year
unless revoked or suspended by the Secretary
or | 11 | | voluntarily surrendered
by the holder.
| 12 | | (e) An independent escrowee may engage in the escrow, | 13 | | settlement, or closing
business, or any combination of such | 14 | | business, and operate as an escrow,
settlement, or closing | 15 | | agent, provided that:
| 16 | | (1) Funds deposited in connection with any escrow, | 17 | | settlement, or
closing shall be deposited in a separate | 18 | | fiduciary trust account or
accounts in a bank or other | 19 | | financial institution insured by an agency of
the federal | 20 | | government unless the instructions provide otherwise. Such
| 21 | | funds shall be the property of the person or persons | 22 | | entitled thereto under
the provisions of the escrow, | 23 | | settlement, or closing and shall be
segregated by escrow, | 24 | | settlement or closing in the records of the
independent | 25 | | escrowee. Such funds shall not be subject to any debts of | 26 | | the
escrowee and shall be used only in accordance with the |
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| 1 | | terms of the
individual escrow, settlement or closing under | 2 | | which the funds were accepted.
| 3 | | (2) Interest received on funds deposited with the | 4 | | independent escrowee
in connection with any escrow, | 5 | | settlement or closing shall be paid to the
depositing party | 6 | | unless the instructions provide otherwise.
| 7 | | (3) The independent escrowee shall maintain separate | 8 | | records of all
receipt and disbursement of escrow, | 9 | | settlement or closing funds.
| 10 | | (4) The independent escrowee shall comply with any | 11 | | rules or regulations
promulgated by the Secretary
| 12 | | pertaining to escrow, settlement or closing
transactions.
| 13 | | (f) The Secretary or his authorized representative shall | 14 | | have the power
and authority to visit and examine at any time | 15 | | any independent escrowee
certified under this Act and to verify | 16 | | and compel compliance with the provisions of
this Act.
| 17 | | (g) A title insurance company or title
insurance agent, not | 18 | | qualified as an independent escrowee, may act in the
capacity | 19 | | of an escrow agent when it is supplying an abstract of title,
| 20 | | grantor-grantee search, tract search, lien search, tax | 21 | | assessment search, or
other limited purpose search to the | 22 | | parties to the transaction even if it is
not issuing a title | 23 | | insurance commitment or title insurance policy. A title
| 24 | | insurance agent may act as an escrow agent only when | 25 | | specifically authorized in
writing on forms prescribed by the | 26 | | Secretary by a title insurance company that
has duly registered |
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| 1 | | the agent with the Secretary and only when notice of the
| 2 | | authorization is provided to and receipt thereof is | 3 | | acknowledged by the
Secretary. The authority granted to a title | 4 | | insurance agent may be limited or
revoked at any time by the | 5 | | title insurance company.
| 6 | | (h) A closing protection letter shall not be issued by an | 7 | | independent escrowee. | 8 | | (Source: P.A. 94-893, eff. 6-20-06.)
| 9 | | Section 99. Effective date. This Act takes effect upon | 10 | | becoming law.
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