Bill Text: CA AB1704 | 2013-2014 | Regular Session | Amended
Bill Title: Underwritten title companies: escrow.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2014-04-23 - In committee: Set, first hearing. Hearing canceled at the request of author. [AB1704 Detail]
Download: California-2013-AB1704-Amended.html
BILL NUMBER: AB 1704 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MARCH 28, 2014
INTRODUCED BY Assembly Member Hagman
FEBRUARY 13, 2014
An act to amend Section 12389 of the Insurance Code, relating to
title insurance.
LEGISLATIVE COUNSEL'S DIGEST
AB 1704, as amended, Hagman. Underwritten title companies: escrow.
Existing law authorizes an underwritten title company, as defined,
to engage in the escrow business and act as an escrow agent as long
as it fulfills specified requirements. Existing law requires an
underwritten title company to obtain a license from the Insurance
Commissioner by filing an application with the commissioner and
paying a filing fee of $354.
This bill would make technical, nonsubstantive changes to those
provisions.
This bill would authorize the commissioner to license an
underwritten title company to engage in escrow business in all
counties of this state with one application. This bill would also
require an underwritten title company seeking to expand its escrow
business to pay a one-time fee of $449 or the reasonable regulatory
cost, whichever is less.
Vote: majority. Appropriation: no. Fiscal committee: no
yes . State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 12389 of the Insurance Code is amended to read:
12389. (a) An underwritten title company as defined in Section
12340.5, which shall be a stock corporation, may engage in the
business of preparing title searches, title reports, title
examinations, or certificates or abstracts of title, upon the basis
of which a title insurer writes title policies, provided that:
(1) Only domestic corporations may be licensed under this section
and an underwritten title company, as defined in Section 12340.5,
shall not become licensed under this section, or change the name
under which it is licensed or operates, unless it has first complied
with Section 881.
(2) (A) Depending upon the
county or counties in which the company is licensed to transact
business, it shall maintain required minimum net worth as follows:
Aggregate number of
documents
recorded and documents
filed in the
offices of the county
recorders in the
preceding calendar year in
all counties
where the company is
licensed to transact
business.
Amount of
required
Number of documents minimum net worth
Less than 50,000 .............. $ 75,000
50,000 to 100,000 ............. 120,000
100,000 to 500,000 ............ 200,000
500,000 to 1,000,000 .......... 300,000
1,000,000 or more ............. 400,000
"Net worth" is defined as the excess of assets over all
liabilities and required reserves. It may carry as an asset the
actual cost of its title plant provided the value ascribed to that
asset shall not exceed the aggregate value of all other assets.
(B) Where
Where a title plant of an underwritten title company is
not being currently maintained, the asset value of the plant shall
not exceed its asset value as determined in the preceding paragraph
as of the date to which that plant is currently maintained, less
one-tenth thereof for each succeeding year or part of the succeeding
year that the plant is not being currently maintained. For the
purposes of this section, a title plant shall be deemed currently
maintained so long as it is used in the normal conduct of the
business of title insurance, and (i) (A)
the owner of the plant continues regularly to obtain and index
title record data to the plant or to a continuation thereof in a
format other than that previously used, including, but not limited
to, computerization of the data, or (ii) (B)
the owner of the plant is a participant, in an arrangement for
joint use of a title plant system regularly maintained in any format,
provided the owner is contractually entitled to receive a copy of
the title record data contained in the jointly used title plant
system during the period of the owner's participation therein, either
periodically or upon termination of that participation, at a cost
not to exceed the actual cost of duplication of the title record
data.
(C) An
An underwritten title company at all times shall
maintain current assets of at least ten thousand dollars ($10,000) in
excess of its current liabilities, as current assets and liabilities
may be defined pursuant to regulations made by the commissioner. In
making the regulations, the commissioner shall be guided by generally
accepted accounting principles followed by certified public
accountants in this state.
(3) (A) An
(3) An underwritten title company
shall obtain from the commissioner a license to transact its
business. The license shall not be granted until the applicant
conforms to the requirements of this section and all other provisions
of this code specifically applicable to applicant. After issuance
the holder shall continue to comply with the requirements as to its
business set forth in this code, in the applicable rules and
regulations of the commissioner and in the laws of this state.
(B) Any
Any underwritten title company who possesses, or is
required to possess, a license pursuant to this section shall be
subject as if an insurer to the provisions of Article 8 (commencing
with Section 820) of Chapter 1 of Part 2 of Division 1 of this code
and shall be deemed to be subject to authorization by the Insurance
Commissioner within the meaning of subdivision (e) of Section 25100
of the Corporations Code.
(C) The
The license may be obtained by filing an application on
a form prescribed by the commissioner accompanied by a filing fee of
three hundred fifty-four dollars ($354). The license when issued
shall be for an indefinite term and shall expire with the termination
of the existence of the holder, subject to the annual renewal fee
imposed under Sections 12415 and 12416.
(D) An
An underwritten title company seeking to extend its
license to an additional county shall pay a two hundred seven dollar
($207) fee for each additional county, and shall furnish to the
commissioner evidence, at least sufficient to meet the minimum net
worth requirements of paragraph (2), of its financial ability to
expand its business operation to include the additional county or
counties. An underwritten title company seeking to expand its
escrow business pursuant to subdivision (c) shall pay a one-time fee
of four hundred forty-nine dollars ($449) or the reasonable
regulatory cost, whichever is less.
(4) (A) An underwritten title company shall furnish an audit to
the commissioner on the forms provided by the commissioner annually,
either on a calendar year basis on or before March 31 or, if approved
in writing by the commissioner in respect to an individual company,
on a fiscal year basis on or before 90 days after the end of the
fiscal year. The time for furnishing an audit required by this
paragraph may be extended, for good cause shown, on written approval
of the commissioner for a period, not to exceed 60 days. Failure to
submit an audit on time, or within the extended time that the
commissioner may grant, shall be grounds for an order by the
commissioner to accept no new business pursuant to subdivision (d).
The audits shall be private, except that a synopsis of the balance
sheet on a form prescribed by the commissioner may be made available
to the public.
(B) The audits shall be made in accordance with generally accepted
auditing standards by an independent certified public accountant or
independent licensed public accountant whose certification or license
is in good standing at the time of the preparation. The fee for
filing the audit shall be three hundred thirteen dollars ($313).
(C) The commissioner may refuse to accept an audit or order a new
audit for any of the following reasons:
(i) Adverse result in any proceeding before the California Board
of Accountancy affecting the auditor's license.
(ii) The auditor has an affiliation with the underwritten title
company or any of its officers or directors that would prevent his or
her reports on the company from being reasonably objective.
(iii) The auditor has suffered conviction of a misdemeanor or
felony based on his or her activities as an accountant.
(iv) Judgment adverse to the auditor in any civil action finding
him or her guilty of fraud, deceit, or misrepresentation in the
practice of his or her profession.
(D) Any
Any company that fails to file an audit or other report
on or before the date it is due shall pay to the commissioner a
penalty fee of one hundred eighteen dollars ($118) and on failure to
pay that or any other fee or file the audit required by this section
shall forfeit the privilege of accepting new business until the
delinquency is corrected.
(b) An underwritten title company may engage in the escrow
business and act as escrow agent , as defined in Sections
17003 and 17004 of the Financial Code, provided that:
(1) It shall maintain record of all receipts and disbursements of
escrow funds.
(2) It shall deposit seven thousand five hundred dollars ($7,500)
for each county in which it transacts business in some form permitted
by Section 12351 with the commissioner who shall immediately make a
special deposit of that amount in the State Treasury and that deposit
shall be subject to Sections 12353, 12356, 12357, and 12358 and, as
long as there are no claims against the deposit, all interest and
dividends thereon shall be paid to the depositor. The deposit shall
be for the security and protection of persons having lawful claims
against the depositor growing out of escrow transactions with it. The
deposit shall be maintained until four years after all escrows
handled by the depositor have been closed.
(A) The commissioner may release the deposits prior to the passage
of the four-year period upon presentation of evidence satisfactory
to the commissioner of either a statutory merger of the depositor
into a licensee or certificate holder subject to the jurisdiction of
the commissioner, or a valid assumption agreement under which all
liability of the depositor stemming from escrow transactions handled
by it is assumed by a licensee or certificate holder subject to the
jurisdiction of the commissioner.
(B) With the foregoing exceptions, the deposit shall be returned
to the depositor or lawful successor in interest following the
four-year period, upon presentation of evidence satisfactory to the
commissioner that there are no claims against the deposit stemming
from escrow transactions handled by the depositor. If the
commissioner has evidence of one or more claims against the
depositor, and the depositor is not in conservatorship or
liquidation, the commissioner may interplead the deposit by special
endorsement to a court of competent jurisdiction for distribution on
the basis that claims against the depositor stemming from escrow
transactions handled by it have priority in the distribution over
other claims against the depositor.
(c) An underwritten title company may
be licensed by the commissioner to engage in escrow business in all
counties in this state with one application.
(c)
(d) The commissioner shall, whenever it appears
necessary, examine the business and affairs of a company licensed
under this section. All of these examinations shall be at the expense
of the company.
(d) (1)
(e) At any time that the commissioner determines, after
notice and hearing, that a company licensed under this section has
willfully failed to comply with a provision of this section, the
commissioner shall make his or her order prohibiting the company from
conducting its business for a period of not more than one year.
(2) Any
Any company violating the commissioner's order is
subject to seizure under Article 14 (commencing with Section 1010) of
Chapter 1 of Part 2 of Division 1, is guilty of a misdemeanor, and
may have the license revoked by the commissioner. A person aiding and
abetting a company in a violation of the commissioner's order is
guilty of a misdemeanor.
(e) The
The purpose of this section is to maintain the solvency
of the companies subject to this section and to protect the public
by preventing fraud and requiring fair dealing. In order to carry out
these purposes, the commissioner may make reasonable rules and
regulations to govern the conduct of its business of companies
subject to this section.
(f) The
The name under which each underwritten title company is
licensed shall at all times be an approved name. The fee for filing
an application for a change of name shall be one hundred eighteen
dollars ($118). Each company shall be subject to the provisions of
Article 14 (commencing with Section 1010) and Article 14.5
(commencing with Section 1065.1) of Chapter 1 of Part 2 of Division
1.
(g) The
The rules and regulations shall be adopted, amended, or
repealed in accordance with the procedure provided in Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code.
(f) This section does not prohibit an underwritten title company
from engaging in escrow activities in its counties of licensure on
properties located outside this state if those activities do not
violate the laws of that other state or country.
