Bill Text: IL SB1996 | 2017-2018 | 100th General Assembly | Introduced


Bill Title: 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 other than a title insurance company. Effective immediately.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced) 2017-08-04 - Pursuant to Senate Rule 3-9(b) / Referred to Assignments [SB1996 Detail]

Download: Illinois-2017-SB1996-Introduced.html


100TH GENERAL ASSEMBLY
State of Illinois
2017 and 2018
SB1996

Introduced 2/10/2017, by Sen. Don Harmon

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

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 other than a title insurance company. Effective immediately.
LRB100 09222 SMS 19378 b

A BILL FOR

SB1996LRB100 09222 SMS 19378 b
1 AN ACT concerning regulation.
2 Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
4 Section 5. The Title Insurance Act is amended by changing
5Sections 3, 16, and 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
8following shall have the following meanings unless the context
9requires otherwise:
10 (1) "Title insurance business" or "business of title
11insurance" 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,
26warranting, or indemnifying owners of real or personal property

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1or the holders of liens or encumbrances thereon or others
2interested therein against loss or damage suffered by reason of
3liens, encumbrances upon, defects in, or the unmarketability of
4the title to the property; the invalidity or unenforceability
5of any liens or encumbrances thereon; or doing any business in
6substance equivalent to any of the foregoing. "Warranting" for
7purpose of this provision shall not include any warranty
8contained in instruments of encumbrance or conveyance. Title
9insurance is a single line form of insurance, also known as
10monoline. An attorney's opinion of title pursuant to paragraph
11(1)(C) is not intended to be within the definition of "title
12insurance".
13 (2) "Title insurance company" means any domestic company
14organized under the laws of this State for the purpose of
15conducting the business of title insurance and any title
16insurance company organized under the laws of another State,
17the District of Columbia or foreign government and authorized
18to transact the business of title insurance in this State.
19 (3) "Title insurance agent" means a person, firm,
20partnership, association, corporation or other legal entity
21registered by a title insurance company and authorized by such
22company to determine insurability of title in accordance with
23generally acceptable underwriting rules and standards in
24reliance on either the public records or a search package
25prepared from a title plant, or both, and authorized by such
26title insurance company in addition to do any of the following:

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1act as an escrow agent pursuant to subsections (f), (g), and
2(h) of Section 16 of this Act, solicit title insurance, collect
3premiums, or issue title insurance commitments, policies, and
4endorsements of the title insurance company; provided,
5however, the term "title insurance agent" shall not include
6officers and salaried employees of any title insurance company.
7 (4) "Producer of title business" is any person, firm,
8partnership, association, corporation or other legal entity
9engaged in this State in the trade, business, occupation or
10profession 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
13natural persons or other legal entities that buy or sell
14interests in real property or that lend money with such
15interests as security.
16 (5) "Associate" is any firm, association, partnership,
17corporation or other legal entity organized for profit in which
18a producer of title business is a director, officer, or partner
19thereof, or owner of a financial interest, as defined herein,
20in such entity; any legal entity that controls, is controlled
21by, or is under common control with a producer of title
22business; and any natural person or legal entity with whom a
23producer of title business has any agreement, arrangement, or
24understanding or pursues any course of conduct the purpose of
25which is to evade the provisions of this Act.
26 (6) "Financial interest" is any ownership interest, legal

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1or beneficial, except ownership of publicly traded stock.
2 (7) "Refer" means to place or cause to be placed, or to
3exercise any power or influence over the placing of title
4business, whether or not the consent or approval of any other
5person is sought or obtained with respect to the referral.
6 (8) "Escrow Agent" means any title insurance company or any
7title insurance agent, including independent contractors of
8either, acting on behalf of a title insurance company, which
9receives deposits, in trust, of funds or documents, or both,
10for the purpose of effecting the sale, transfer, encumbrance or
11lease of real property to be held by such escrow agent until
12title to the real property that is the subject of the escrow is
13in a prescribed condition. An escrow agent conducting closings
14shall 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,
17partnership, association, corporation or other legal entity,
18other than a title insurance company or a title insurance
19agent, which receives deposits, in trust, of funds or
20documents, or both, for the purpose of effecting the sale,
21transfer, encumbrance or lease of real property to be held by
22such escrowee until title to the real property that is the
23subject of the escrow is in a prescribed condition. Federal and
24State chartered banks, savings and loan associations, credit
25unions, mortgage bankers, banks or trust companies authorized
26to do business under the Illinois Corporate Fiduciary Act,

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1licensees under the Consumer Installment Loan Act, real estate
2brokers licensed pursuant to the Real Estate License Act of
32000, as such Acts are now or hereafter amended, and licensed
4attorneys when engaged in the attorney-client relationship are
5exempt from the escrow provisions of this Act. "Independent
6Escrowee" does not include employees or independent
7contractors of a title insurance company or title insurance
8agent authorized by a title insurance company to perform
9closing, escrow, or settlement services.
10 (10) "Single risk" means the insured amount of any title
11insurance policy, except that where 2 or more title insurance
12policies are issued simultaneously covering different estates
13in the same real property, "single risk" means the sum of the
14insured amounts of all such title insurance policies. Any title
15insurance policy insuring a mortgage interest, a claim payment
16under which reduces the insured amount of a fee or leasehold
17title insurance policy, shall be excluded in computing the
18amount of a single risk to the extent that the insured amount
19of the mortgage title insurance policy does not exceed the
20insured amount of the fee or leasehold title insurance policy.
21 (11) "Department" means the Department of Financial and
22Professional Regulation.
23 (12) "Secretary" means the Secretary of Financial and
24Professional Regulation.
25 (13) "Insured closing letter" or "closing protection
26letter" means an indemnification or undertaking to a party to a

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1real property transaction, from a principal such as a title
2insurance company, setting forth in writing the extent of the
3title insurance company's principal's responsibility for
4intentional misconduct or errors in closing the real property
5transaction on the part of a settlement agent, such as a title
6insurance agent or other settlement service provider, and
7includes protection afforded pursuant to subsections (f), (g),
8and (h) of Section 16 and Section 16.1 of this Act even if such
9protection is afforded by contract.
10 (14) "Residential real property" means a building or
11buildings consisting of one to 4 residential units or a
12residential condominium unit where at least one of the
13residential units or condominium units is occupied or intended
14to be occupied as a residence by the purchaser or borrower, or
15in the event that the purchaser or borrower is the trustee of a
16trust, by a beneficiary of that trust.
17 (15) "Financial institution" means any bank subject to the
18Illinois Banking Act, any savings and loan association subject
19to the Illinois Savings and Loan Act of 1985, any savings bank
20subject to the Savings Bank Act, any credit union subject to
21the Illinois Credit Union Act, and any federally chartered
22commercial bank, savings and loan association, savings bank, or
23credit union organized and operated in this State pursuant to
24the 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
4or other legal entity shall act as or hold itself out to be a
5title insurance agent unless duly registered by a title
6insurance company with the Secretary.
7 (b) Each application for registration shall be made on a
8form specified by the Secretary and prepared by each title
9insurance company which the agent represents. The title
10insurance company shall retain the copy of the application and
11forward a copy to the Secretary.
12 (c) Every applicant for registration, except a firm,
13partnership, association, limited liability company, or
14corporation, must be 18 years or more of age. Included in every
15application for registration of a title insurance agent,
16including a firm, partnership, association, limited liability
17company, or corporation, shall be an affidavit of the applicant
18title insurance agent, signed and notarized in front of a
19notary public, affirming that the applicant and every owner,
20officer, director, principal, member, or manager of the
21applicant has never been convicted or pled guilty to any felony
22or misdemeanor involving a crime of theft or dishonesty or
23otherwise accurately disclosing any such felony or misdemeanor
24involving a crime of theft or dishonesty. No person who has had
25a conviction or pled guilty to any felony or misdemeanor
26involving theft or dishonesty may be registered by a title

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1insurance company without a written notification to the
2Secretary disclosing the conviction or plea, and no such person
3may serve as an owner, officer, director, principal, or manager
4of any registered title insurance agent without the written
5permission of the Secretary.
6 (d) Registration shall be made annually by a filing with
7the Secretary; supplemental registrations for new title
8insurance agents to be added between annual filings shall be
9made from time to time in the manner provided by the Secretary;
10registrations shall remain in effect unless revoked or
11suspended by the Secretary or voluntarily withdrawn by the
12registrant or the title insurance company.
13 (e) Funds deposited in connection with any escrows,
14settlements, or closings shall be deposited in a separate
15fiduciary trust account or accounts in a bank or other
16financial institution insured by an agency of the federal
17government unless the instructions provide otherwise. The
18funds shall be the property of the person or persons entitled
19thereto under the provisions of the escrow, settlement, or
20closing and shall be segregated by escrow, settlement, or
21closing in the records of the escrow agent. The funds shall not
22be subject to any debts of the escrowee and shall be used only
23in accordance with the terms of the individual escrow,
24settlement, or closing under which the funds were accepted.
25 Interest received on funds deposited with the escrow agent
26in connection with any escrow, settlement, or closing shall be

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1paid to the depositing party unless the instructions provide
2otherwise.
3 The escrow agent shall maintain separate records of all
4receipts and disbursements of escrow, settlement, or closing
5funds.
6 The escrow agent shall comply with any rules adopted by the
7Secretary pertaining to escrow, settlement, or closing
8transactions.
9 (f) A title insurance agent shall not act as an escrow
10agent in a nonresidential real property transaction where the
11amount of settlement funds on deposit with the escrow agent is
12less than $2,000,000 or in a residential real property
13transaction unless the title insurance agent, title insurance
14company, or another authorized title insurance agent has
15committed for the issuance of title insurance in that
16transaction and the title insurance agent is authorized to act
17as an escrow agent on behalf of the title insurance company for
18which the commitment for title insurance has been issued. The
19authorization under the preceding sentence shall be given
20either (1) by an agency contract with the title insurance
21company which contract, in compliance with the requirements set
22forth in subsection (g) of this Section, authorizes the title
23insurance agent to act as an escrow agent on behalf of the
24title insurance company or (2) by a closing protection letter
25in compliance with the requirements set forth in Section 16.1
26of this Act, issued by the title insurance company to the

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1seller, buyer, borrower, and lender. A closing protection
2letter shall not be issued by a title insurance agent, an
3independent escrowee, or any other person or entity other than
4a title insurance company. The provisions of this subsection
5(f) shall not apply to the authority of a title insurance agent
6to act as an escrow agent under subsection (g) of Section 17 of
7this Act.
8 (g) If an agency contract between the title insurance
9company and the title insurance agent is the source of the
10authority under subsection (f) of this Section for a title
11insurance agent to act as escrow agent for a real property
12transaction, then the agency contract shall provide for no less
13protection from the title insurance company to all parties to
14the real property transaction than the title insurance company
15would have provided to those parties had the title insurance
16company issued a closing protection letter in conformity with
17Section 16.1 of this Act.
18 (h) A title insurance company shall be liable for the acts
19or omissions of its title insurance agent as an escrow agent if
20the title insurance company has authorized the title insurance
21agent under subsections (f) and (g) of this Section 16 and only
22to the extent of the liability undertaken by the title
23insurance company in the agency agreement or closing protection
24letter. The liability, if any, of the title insurance agent to
25the title insurance company for acts and omissions of the title
26insurance agent as an escrow agent shall not be limited or

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1otherwise modified because the title insurance company has
2provided closing protection to a party or parties to a real
3property transaction escrow, settlement, or closing. The
4escrow agent shall not charge a fee for protection provided by
5a title insurance company to parties to real property
6transactions under subsections (f) and (g) of this Section 16
7and Section 16.1, but shall collect from the parties the fee
8charged by the title insurance company and shall promptly remit
9the fee to the title insurance company. The title insurance
10company may charge the parties a reasonable fee for protection
11provided pursuant to subsections (f) and (g) of this Section 16
12and Section 16.1 and shall not pay any portion of the fee to
13the escrow agent. The payment of any portion of the fee to the
14escrow agent by the title insurance company, shall be deemed a
15prohibited inducement or compensation in violation of Section
1624 of this Act.
17 (i) The Secretary shall adopt and amend such rules as may
18be required for the proper administration and enforcement of
19this Section 16 consistent with the federal Real Estate
20Settlement 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,
22eff. 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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1certification and deposit requirements to which title
2insurance companies are subject under Section 4 of this Act.
3 (b) No person, firm, corporation or other legal entity
4shall hold itself out to be an independent escrowee unless it
5has been issued a certificate of authority by the Secretary.
6 (c) Every applicant for a certificate of authority, except
7a firm, partnership, association or corporation, must be 18
8years or more of age.
9 (d) Every certificate of authority shall remain in effect
10one year unless revoked or suspended by the Secretary or
11voluntarily surrendered by the holder.
12 (e) An independent escrowee may engage in the escrow,
13settlement, or closing business, or any combination of such
14business, and operate as an escrow, settlement, or closing
15agent, 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
14have the power and authority to visit and examine at any time
15any independent escrowee certified under this Act and to verify
16and compel compliance with the provisions of this Act.
17 (g) A title insurance company or title insurance agent, not
18qualified as an independent escrowee, may act in the capacity
19of an escrow agent when it is supplying an abstract of title,
20grantor-grantee search, tract search, lien search, tax
21assessment search, or other limited purpose search to the
22parties to the transaction even if it is not issuing a title
23insurance commitment or title insurance policy. A title
24insurance agent may act as an escrow agent only when
25specifically authorized in writing on forms prescribed by the
26Secretary by a title insurance company that has duly registered

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1the agent with the Secretary and only when notice of the
2authorization is provided to and receipt thereof is
3acknowledged by the Secretary. The authority granted to a title
4insurance agent may be limited or revoked at any time by the
5title insurance company.
6 (h) An independent escrowee shall not issue a closing
7protection letter.
8(Source: P.A. 94-893, eff. 6-20-06.)
9 Section 99. Effective date. This Act takes effect upon
10becoming law.
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