Full Text of HB5409 96th General Assembly
HB5409sam001 96TH GENERAL ASSEMBLY
|
Sen. Iris Y. Martinez
Filed: 4/14/2010
|
|
09600HB5409sam001 |
|
LRB096 18556 RPM 39833 a |
|
| 1 |
| AMENDMENT TO HOUSE BILL 5409
| 2 |
| AMENDMENT NO. ______. Amend House Bill 5409 by replacing | 3 |
| everything after the enacting clause with the following:
| 4 |
| "Section 5. The Title Insurance Act is amended by changing | 5 |
| Sections 3 and 16 and by adding Section 16.1 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 |
|
|
|
09600HB5409sam001 |
- 2 - |
LRB096 18556 RPM 39833 a |
|
| 1 |
| title insurance;
| 2 |
| (i) soliciting or negotiating the issuance of | 3 |
| title insurance;
| 4 |
| (ii) guaranteeing, warranting, or otherwise | 5 |
| insuring the correctness of
title
searches for all | 6 |
| instruments affecting titles to real property, any | 7 |
| interest in
real property, cooperative units and | 8 |
| proprietary leases, and for all liens or
charges | 9 |
| affecting the same;
| 10 |
| (iii) handling of escrows, settlements, or | 11 |
| closings;
| 12 |
| (iv) executing title insurance policies;
| 13 |
| (v) effecting contracts of reinsurance;
| 14 |
| (vi) abstracting, searching, or examining titles; | 15 |
| or
| 16 |
| (vii) issuing insured closing letters or closing | 17 |
| protection letters;
| 18 |
| (C) Guaranteeing, warranting, or insuring searches or | 19 |
| examinations of
title to real property or any interest in | 20 |
| real property, with the exception of
preparing an | 21 |
| attorney's opinion of title; or
| 22 |
| (D) Guaranteeing or warranting the status of title as | 23 |
| to ownership of or
liens on real property and personal | 24 |
| property by any person other than the
principals to the | 25 |
| transaction; or
| 26 |
| (E) Doing or proposing to do any business substantially |
|
|
|
09600HB5409sam001 |
- 3 - |
LRB096 18556 RPM 39833 a |
|
| 1 |
| equivalent to any
of the activities listed in this | 2 |
| subsection,
provided that the preparation of an attorney's | 3 |
| opinion
of title pursuant to paragraph (1)(C) is not | 4 |
| intended to be within the
definition of "title insurance | 5 |
| business" or "business of title insurance".
| 6 |
| (1.5) "Title insurance" means insuring, guaranteeing, | 7 |
| warranting, or
indemnifying owners of real or personal property | 8 |
| or the holders of liens or
encumbrances thereon or others | 9 |
| interested therein against loss or damage
suffered by reason of | 10 |
| liens, encumbrances upon, defects in, or the
unmarketability of | 11 |
| the title to the property; the invalidity or
unenforceability | 12 |
| of any liens or encumbrances thereon; or doing any business in
| 13 |
| substance equivalent to any of the foregoing.
"Warranting" for | 14 |
| purpose of this provision shall not
include any warranty | 15 |
| contained in instruments of encumbrance or conveyance.
Title | 16 |
| insurance is a single line form of insurance, also known as | 17 |
| monoline. An attorney's opinion of title pursuant to paragraph | 18 |
| (1)(C) is not intended to
be within the definition of "title | 19 |
| insurance".
| 20 |
| (2) "Title insurance company" means any domestic company | 21 |
| organized under
the laws of this State for the purpose of | 22 |
| conducting the business of
title insurance and any title | 23 |
| insurance
company organized under the laws of another State, | 24 |
| the District of Columbia
or foreign government and authorized | 25 |
| to transact the business of
title insurance in this State.
| 26 |
| (3) "Title insurance agent" means a person, firm, |
|
|
|
09600HB5409sam001 |
- 4 - |
LRB096 18556 RPM 39833 a |
|
| 1 |
| partnership,
association, corporation or other legal entity | 2 |
| registered by a title
insurance company and authorized by such | 3 |
| company to determine insurability
of title in accordance with | 4 |
| generally acceptable underwriting rules and
standards in | 5 |
| reliance on either the public records or a search package
| 6 |
| prepared from a title plant, or both, and authorized by such | 7 |
| title insurance company in addition to do any
of the following: | 8 |
| act as an escrow agent pursuant to subsections (f), (g), and | 9 |
| (h) of Section 16 of this Act , solicit title insurance, collect
| 10 |
| premiums, or issue title insurance commitments reports , | 11 |
| binders or commitments to insure and
policies , and endorsements | 12 |
| of the title insurance company; in its behalf, provided, | 13 |
| however, the term "title insurance agent"
shall not include | 14 |
| officers and salaried employees of any title insurance
company.
| 15 |
| (4) "Producer of title business" is any person, firm, | 16 |
| partnership,
association, corporation or other legal entity | 17 |
| engaged in this State in the
trade, business, occupation or | 18 |
| profession of (i) buying or selling
interests in real property, | 19 |
| (ii) making loans secured by interests in real
property, or | 20 |
| (iii) acting as broker, agent, attorney, or representative of
| 21 |
| natural persons or other legal entities that buy or sell | 22 |
| interests in real
property or that lend money with such | 23 |
| interests as security.
| 24 |
| (5) "Associate" is any firm, association, partnership, | 25 |
| corporation or
other legal entity organized for profit in which | 26 |
| a producer of title
business is a director, officer, or partner |
|
|
|
09600HB5409sam001 |
- 5 - |
LRB096 18556 RPM 39833 a |
|
| 1 |
| thereof, or owner of a
financial interest, as defined herein, | 2 |
| in such entity; any legal entity
that controls, is controlled | 3 |
| by, or is under common control with a producer
of title | 4 |
| business; and any natural person or legal entity with whom a
| 5 |
| producer of title business has any agreement, arrangement, or | 6 |
| understanding
or pursues any course of conduct the purpose of | 7 |
| which is to evade the
provisions of this Act.
| 8 |
| (6) "Financial interest" is any ownership interest, legal | 9 |
| or beneficial,
except ownership of publicly traded stock.
| 10 |
| (7) "Refer" means to place or cause to be placed, or to | 11 |
| exercise any
power or influence over the placing of title | 12 |
| business, whether or not the
consent or approval of any other | 13 |
| person is sought or obtained with respect
to the referral.
| 14 |
| (8) "Escrow Agent" means any title insurance company or any | 15 |
| title
insurance agent, including independent contractors of | 16 |
| either, acting on behalf of a title insurance company , which
| 17 |
| receives deposits, in trust, of funds or documents, or both, | 18 |
| for the purpose
of effecting the sale, transfer, encumbrance or | 19 |
| lease of real property to
be held by such escrow agent until | 20 |
| title to the real property that is the
subject of the escrow is | 21 |
| in a prescribed condition. An escrow agent conducting closings | 22 |
| shall be subject to the provisions of paragraphs (1) through | 23 |
| (4) of subsection (e) of Section 16 of this Act.
| 24 |
| (9) "Independent Escrowee" means any firm, person, | 25 |
| partnership,
association, corporation or other
legal entity, | 26 |
| other than a title insurance company or a title insurance
|
|
|
|
09600HB5409sam001 |
- 6 - |
LRB096 18556 RPM 39833 a |
|
| 1 |
| agent, which receives deposits, in trust, of funds or | 2 |
| documents, or both, for
the purpose of effecting the sale, | 3 |
| transfer, encumbrance or lease of real
property to be held by | 4 |
| such escrowee until title to the real property that
is the | 5 |
| subject of the escrow is in a prescribed condition. Federal and
| 6 |
| State chartered banks, savings and loan associations, credit | 7 |
| unions,
mortgage bankers, banks or trust companies authorized | 8 |
| to do business under
the Illinois Corporate Fiduciary Act, | 9 |
| licensees under the Consumer
Installment Loan Act, real estate | 10 |
| brokers licensed pursuant to the Real
Estate License Act of | 11 |
| 2000, as such Acts are now or hereafter amended, and
licensed | 12 |
| attorneys when engaged in the attorney-client relationship are
| 13 |
| exempt from the escrow provisions of this Act. "Independent | 14 |
| Escrowee" does not include employees or independent | 15 |
| contractors of a title insurance company or title insurance | 16 |
| agent authorized by a title insurance company to perform | 17 |
| closing, escrow, or settlement services.
| 18 |
| (10) "Single risk" means the insured amount of any title | 19 |
| insurance
policy, except that where 2 or more title insurance | 20 |
| policies are issued
simultaneously covering different estates | 21 |
| in the same real property, "single
risk" means the sum of the | 22 |
| insured amounts of all such title insurance
policies. Any title | 23 |
| insurance policy insuring a mortgage interest, a claim
payment | 24 |
| under which reduces the insured amount of a fee or leasehold | 25 |
| title
insurance policy, shall be excluded in computing the | 26 |
| amount of a single
risk to the extent that the insured amount |
|
|
|
09600HB5409sam001 |
- 7 - |
LRB096 18556 RPM 39833 a |
|
| 1 |
| of the mortgage title insurance
policy does not exceed the | 2 |
| insured amount of the fee or leasehold title
insurance policy.
| 3 |
| (11) "Department" means the Department of Financial and | 4 |
| Professional Regulation.
| 5 |
| (12) "Secretary" means the Secretary
of Financial and | 6 |
| Professional Regulation.
| 7 |
| (13) "Insured closing letter" or "closing protection | 8 |
| letter" means
an indemnification or undertaking to a party to a | 9 |
| real property estate transaction, from
a principal such as a | 10 |
| title insurance company or similar entity , setting forth
in | 11 |
| writing the extent of the principal's responsibility for | 12 |
| intentional
misconduct or errors in closing the real property | 13 |
| estate transaction on the part of a
settlement agent, such as a | 14 |
| title insurance agent or other settlement service
provider , and | 15 |
| includes protection afforded pursuant to subsections (f), (g), | 16 |
| and (h) of Section 16 and Section 16.1 of this Act even if such | 17 |
| protection is afforded by contract .
| 18 |
| (14) "Residential real property" means a building or | 19 |
| buildings consisting of one to 4 residential units or a | 20 |
| residential condominium unit where at least one of the | 21 |
| residential units or condominium units is occupied or intended | 22 |
| to be occupied as a residence by the purchaser or borrower, or | 23 |
| in the event that the purchaser or borrower is the trustee of a | 24 |
| trust, by a beneficiary of that trust.
| 25 |
| (Source: P.A. 94-893, eff. 6-20-06; 95-570, eff. 8-31-07.)
|
|
|
|
09600HB5409sam001 |
- 8 - |
LRB096 18556 RPM 39833 a |
|
| 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 in duplicate by | 9 |
| each title insurance company
which the agent represents. The | 10 |
| title insurance company shall retain the
copy of the | 11 |
| application and forward the original to the Secretary with the
| 12 |
| appropriate fee.
| 13 |
| (c) Every applicant for registration, except a firm, | 14 |
| partnership,
association or corporation, must be 18 years or | 15 |
| more of age.
| 16 |
| (d) Registration shall be made annually by a filing with | 17 |
| the Secretary;
supplemental registrations for new title | 18 |
| insurance agents to be added
between annual filings shall be | 19 |
| made from time to time in the manner
provided by the Secretary; | 20 |
| registrations shall remain in effect unless
revoked or | 21 |
| suspended by the Secretary or
voluntarily withdrawn by the
| 22 |
| registrant or the title insurance company.
| 23 |
| (e) Funds deposited in connection with any escrows, | 24 |
| settlements, or closings shall be deposited in a separate | 25 |
| fiduciary trust account or accounts in a bank or other | 26 |
| financial institution insured by an agency of the federal |
|
|
|
09600HB5409sam001 |
- 9 - |
LRB096 18556 RPM 39833 a |
|
| 1 |
| government unless the instructions provide otherwise. The | 2 |
| funds shall be the property of the person or persons entitled | 3 |
| thereto under the provisions of the escrow, settlement, or | 4 |
| closing and shall be segregated by escrow, settlement, or | 5 |
| closing in the records of the escrow agent. The funds shall not | 6 |
| be subject to any debts of the escrowee and shall be used only | 7 |
| in accordance with the terms of the individual escrow, | 8 |
| settlement, or closing under which the funds were accepted. | 9 |
| Interest received on funds deposited with the escrow agent | 10 |
| in connection with any escrow, settlement, or closing shall be | 11 |
| paid to the depositing party unless the instructions provide | 12 |
| otherwise. | 13 |
| The escrow agent shall maintain separate records of all | 14 |
| receipts and disbursements of escrow, settlement, or closing | 15 |
| funds. | 16 |
| The escrow agent shall comply with any rules adopted by the | 17 |
| Secretary pertaining to escrow, settlement, or closing | 18 |
| transactions. | 19 |
| (f) A title insurance agent shall not act as an escrow | 20 |
| agent in a nonresidential real property transaction where the | 21 |
| amount of settlement funds on deposit with the escrow agent is | 22 |
| less than $2,000,000 or in a residential real property | 23 |
| transaction unless the title insurance agent, title insurance | 24 |
| company, or another authorized title insurance agent has | 25 |
| committed for the issuance of title insurance in that | 26 |
| transaction and the title insurance agent is authorized to act |
|
|
|
09600HB5409sam001 |
- 10 - |
LRB096 18556 RPM 39833 a |
|
| 1 |
| as an escrow agent on behalf of the title insurance company for | 2 |
| which the commitment for title insurance has been issued. The | 3 |
| authorization under the preceding sentence shall be given | 4 |
| either (1) by an agency contract with the title insurance | 5 |
| company which contract, in compliance with the requirements set | 6 |
| forth in subsection (g) of this Section, authorizes the title | 7 |
| insurance agent to act as an escrow agent on behalf of the | 8 |
| title insurance company or (2) by a closing protection letter | 9 |
| in compliance with the requirements set forth in Section 16.1 | 10 |
| of this Act, issued by the title insurance company to the | 11 |
| seller, buyer, borrower, and lender. A closing protection | 12 |
| letter shall not be issued by a title insurance agent. The | 13 |
| provisions of this subsection (f) shall not apply to the | 14 |
| authority of a title insurance agent to act as an escrow agent | 15 |
| under subsection (g) of Section 17 of this Act. | 16 |
| (g) If an agency contract between the title insurance | 17 |
| company and the title insurance agent is the source of the | 18 |
| authority under subsection (f) of this Section for a title | 19 |
| insurance agent to act as escrow agent for a real property | 20 |
| transaction, then the agency contract shall provide for no less | 21 |
| protection from the title insurance company to all parties to | 22 |
| the real property transaction than the title insurance company | 23 |
| would have provided to those parties had the title insurance | 24 |
| company issued a closing protection letter in conformity with | 25 |
| Section 16.1 of this Act. | 26 |
| (h) A title insurance company shall be liable for the acts |
|
|
|
09600HB5409sam001 |
- 11 - |
LRB096 18556 RPM 39833 a |
|
| 1 |
| or omissions of its title insurance agent as an escrow agent if | 2 |
| the title insurance company has authorized the title insurance | 3 |
| agent under subsections (f) and (g) of this Section 16 and only | 4 |
| to the extent of the liability undertaken by the title | 5 |
| insurance company in the agency agreement or closing protection | 6 |
| letter. The liability, if any, of the title insurance agent to | 7 |
| the title insurance company for acts and omissions of the title | 8 |
| insurance agent as an escrow agent shall not be limited or | 9 |
| otherwise modified because the title insurance company has | 10 |
| provided closing protection to a party or parties to a real | 11 |
| property transaction escrow, settlement, or closing. The | 12 |
| escrow agent shall not charge a fee for protection provided by | 13 |
| a title insurance company to parties to real property | 14 |
| transactions under subsections (f) and (g) of this Section 16 | 15 |
| and Section 16.1, but shall collect from the parties the fee | 16 |
| charged by the title insurance company and shall promptly remit | 17 |
| the fee to the title insurance company. The title insurance | 18 |
| company may charge the parties a reasonable fee for protection | 19 |
| provided pursuant to subsections (f) and (g) of this Section 16 | 20 |
| and shall not pay any portion of the fee to the escrow agent. | 21 |
| The payment of any portion of the fee to the escrow agent by | 22 |
| the title insurance company, shall be deemed a prohibited | 23 |
| inducement or compensation in violation of Section 24 of this | 24 |
| Act. | 25 |
| (Source: P.A. 94-893, eff. 6-20-06.)
|
|
|
|
09600HB5409sam001 |
- 12 - |
LRB096 18556 RPM 39833 a |
|
| 1 |
| (215 ILCS 155/16.1 new) | 2 |
| Sec. 16.1. Closing or settlement protection. | 3 |
| (a) Notwithstanding the provisions of item (iii) of | 4 |
| paragraph (B) of subsection (1) and subsections (3) and (8) of | 5 |
| Section 3 and Section 16 of this Act, a title insurance company | 6 |
| or title insurance agent is not authorized to act as an escrow | 7 |
| agent in a nonresidential real property transaction where the | 8 |
| amount of settlement funds on deposit with the escrow agent is | 9 |
| less than $2,000,000 or in a residential real property | 10 |
| transaction unless as part of the same transaction a | 11 |
| commitment, binder, or title insurance policy and closing | 12 |
| protection letters protecting the buyer's or borrower's, | 13 |
| lender's, and seller's interests have been issued by the title | 14 |
| insurance company on whose behalf the commitment, binder, or | 15 |
| title insurance policy has been issued. Closing protection | 16 |
| letters are not required when the authorization for the title | 17 |
| insurance agent to act as an escrow agent is given by an agency | 18 |
| contract with the title insurance company pursuant to | 19 |
| subsections (f), (g), and (h) of Section 16 of this Act, but | 20 |
| shall be issued by the title insurance company upon the request | 21 |
| of a party to a nonresidential real property transaction where | 22 |
| the amount of settlement funds on deposit with the escrow agent | 23 |
| is less than $2,000,000 or in a residential real property | 24 |
| transaction. | 25 |
| (b) Unless otherwise agreed to between a title insurance | 26 |
| company and a protected person or entity, a closing protection |
|
|
|
09600HB5409sam001 |
- 13 - |
LRB096 18556 RPM 39833 a |
|
| 1 |
| letter under this Section shall indemnify all parties to a real | 2 |
| property transaction against actual loss, not to exceed the | 3 |
| amount of the settlement funds deposited with the escrow agent. | 4 |
| The closing protection letter shall in any event indemnify all | 5 |
| parties to a real property transaction when such losses arise | 6 |
| out of: | 7 |
| (1) failure of the escrow agent to comply with written | 8 |
| closing instructions to the extent that they relate to (A) | 9 |
| the status of the title to an interest in land or the | 10 |
| validity, enforceability, and priority of the lien of a | 11 |
| mortgage on an interest in land, including the obtaining of | 12 |
| documents and the disbursement of funds necessary to | 13 |
| establish the status of title or lien or (B) the obtaining | 14 |
| of any other document specifically required by a party to | 15 |
| the real property transaction, but only to the extent that | 16 |
| the failure to obtain such other document affects the | 17 |
| status of the title to an interest in land or the validity, | 18 |
| enforceability, and priority of the lien of a mortgage on | 19 |
| an interest in land; or | 20 |
| (2) fraud, dishonesty, or negligence of the escrow | 21 |
| agent in handling funds or documents in connection with | 22 |
| closings to the extent that the fraud, dishonesty, or | 23 |
| negligence relates to the status of the title to the | 24 |
| interest in land or to the validity, enforceability, and | 25 |
| priority of the lien of a mortgage on an interest in land | 26 |
| or, in the case of a seller, to the extent that the fraud, |
|
|
|
09600HB5409sam001 |
- 14 - |
LRB096 18556 RPM 39833 a |
|
| 1 |
| dishonesty, or negligence relates to funds paid to or on | 2 |
| behalf of, or which should have been paid to or on behalf | 3 |
| of, the seller. | 4 |
| (c) The indemnification under a closing protection letter | 5 |
| may include limitations on the liability of the title insurance | 6 |
| company for any of the following: | 7 |
| (1) Failure of the escrow agent to comply with closing | 8 |
| instructions that require title insurance protection | 9 |
| inconsistent with that set forth in the title insurance | 10 |
| commitment for the real property transaction. Instructions | 11 |
| that require the removal of specific exceptions to title or | 12 |
| compliance with the requirements contained in the title | 13 |
| insurance commitment shall not be deemed to be | 14 |
| inconsistent. | 15 |
| (2) Loss or impairment of funds in the course of | 16 |
| collection or while on deposit with a bank due to bank | 17 |
| failure, insolvency, or suspension, except such as shall | 18 |
| result from failure of the escrow agent closer to comply | 19 |
| with written closing instructions to deposit the funds in a | 20 |
| bank that is designated by name by a party to the real | 21 |
| property transaction. | 22 |
| (3) Mechanics' and materialmen's liens in connection | 23 |
| with sale, purchase, lease, or construction loan | 24 |
| transactions, except to the extent that protection against | 25 |
| such liens is afforded by a title insurance commitment or | 26 |
| policy issued by the escrow agent. |
|
|
|
09600HB5409sam001 |
- 15 - |
LRB096 18556 RPM 39833 a |
|
| 1 |
| (4) Failure of the escrow agent to comply with written | 2 |
| closing instructions to the extent that such instructions | 3 |
| require a determination by the escrow agent of the | 4 |
| validity, enforceability, or effectiveness of any document | 5 |
| described in subitem (B) of item (1) of subsection (b) of | 6 |
| this Section. | 7 |
| (5) Fraud, dishonesty, or negligence of an employee, | 8 |
| agent, attorney, or broker, who is not also the escrow | 9 |
| agent or an independent contract closer of the escrow | 10 |
| agent, of the indemnified party to the real property | 11 |
| transaction. | 12 |
| (6) The settlement or release of any claim by the | 13 |
| indemnified party to the real property transaction without | 14 |
| the written consent of the title insurance company. | 15 |
| (7) Any matters created, suffered, assumed, or agreed | 16 |
| to by, or known to, the indemnified party to the real | 17 |
| property transaction without the written consent of the | 18 |
| title insurance company. | 19 |
| The closing protection letter may also include reasonable | 20 |
| additional provisions concerning the dollar amount of | 21 |
| protection, provided such limit is not less than the amount | 22 |
| deposited with the escrow agent, arbitration, subrogation, | 23 |
| claim notices, and other conditions and limitations that do not | 24 |
| materially impair the protection required by this Section 16.1. | 25 |
| (d) This Section shall not apply to the authority of a | 26 |
| title insurance company and title insurance agent to act as an |
|
|
|
09600HB5409sam001 |
- 16 - |
LRB096 18556 RPM 39833 a |
|
| 1 |
| escrow agent under subsection (g) of Section 17 of this Act. ".
|
|