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

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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: (Failed) 2019-01-09 - Session Sine Die [SB1996 Detail]

Download: Illinois-2017-SB1996-Introduced.html

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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
SB1996 LRB100 09222 SMS 19378 b
AN ACT concerning regulation.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Title Insurance Act is amended by changing
Sections 3, 16, and 17 as follows:
(215 ILCS 155/3) (from Ch. 73, par. 1403)
Sec. 3. As used in this Act, the words and phrases
following shall have the following meanings unless the context
requires otherwise:
(1) "Title insurance business" or "business of title
insurance" means:
(A) Issuing as insurer or offering to issue as insurer
title insurance; and
(B) Transacting or proposing to transact one or more of
the following activities when conducted or performed in
contemplation of or in conjunction with the issuance of
title insurance;
(i) soliciting or negotiating the issuance of
title insurance;
(ii) guaranteeing, warranting, or otherwise
insuring the correctness of title searches for all
instruments affecting titles to real property, any
interest in real property, cooperative units and

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proprietary leases, and for all liens or charges
affecting the same;
(iii) handling of escrows, settlements, or
closings;
(iv) executing title insurance policies;
(v) effecting contracts of reinsurance;
(vi) abstracting, searching, or examining titles;
or
(vii) issuing insured closing letters or closing
protection letters;
(C) Guaranteeing, warranting, or insuring searches or
examinations of title to real property or any interest in
real property, with the exception of preparing an
attorney's opinion of title; or
(D) Guaranteeing or warranting the status of title as
to ownership of or liens on real property and personal
property by any person other than the principals to the
transaction; or
(E) Doing or proposing to do any business substantially
equivalent to any of the activities listed in this
subsection, provided that the preparation of an attorney's
opinion of title pursuant to paragraph (1)(C) is not
intended to be within the definition of "title insurance
business" or "business of title insurance".
(1.5) "Title insurance" means insuring, guaranteeing,
warranting, or indemnifying owners of real or personal property

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

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act as an escrow agent pursuant to subsections (f), (g), and
(h) of Section 16 of this Act, solicit title insurance, collect
premiums, or issue title insurance commitments, policies, and
endorsements of the title insurance company; provided,
however, the term "title insurance agent" shall not include
officers and salaried employees of any title insurance company.
(4) "Producer of title business" is any person, firm,
partnership, association, corporation or other legal entity
engaged in this State in the trade, business, occupation or
profession of (i) buying or selling interests in real property,
(ii) making loans secured by interests in real property, or
(iii) acting as broker, agent, attorney, or representative of
natural persons or other legal entities that buy or sell
interests in real property or that lend money with such
interests as security.
(5) "Associate" is any firm, association, partnership,
corporation or other legal entity organized for profit in which
a producer of title business is a director, officer, or partner
thereof, or owner of a financial interest, as defined herein,
in such entity; any legal entity that controls, is controlled
by, or is under common control with a producer of title
business; and any natural person or legal entity with whom a
producer of title business has any agreement, arrangement, or
understanding or pursues any course of conduct the purpose of
which is to evade the provisions of this Act.
(6) "Financial interest" is any ownership interest, legal

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or beneficial, except ownership of publicly traded stock.
(7) "Refer" means to place or cause to be placed, or to
exercise any power or influence over the placing of title
business, whether or not the consent or approval of any other
person is sought or obtained with respect to the referral.
(8) "Escrow Agent" means any title insurance company or any
title insurance agent, including independent contractors of
either, acting on behalf of a title insurance company, which
receives deposits, in trust, of funds or documents, or both,
for the purpose of effecting the sale, transfer, encumbrance or
lease of real property to be held by such escrow agent until
title to the real property that is the subject of the escrow is
in a prescribed condition. An escrow agent conducting closings
shall be subject to the provisions of paragraphs (1) through
(4) of subsection (e) of Section 16 of this Act.
(9) "Independent Escrowee" means any firm, person,
partnership, association, corporation or other legal entity,
other than a title insurance company or a title insurance
agent, which receives deposits, in trust, of funds or
documents, or both, for the purpose of effecting the sale,
transfer, encumbrance or lease of real property to be held by
such escrowee until title to the real property that is the
subject of the escrow is in a prescribed condition. Federal and
State chartered banks, savings and loan associations, credit
unions, mortgage bankers, banks or trust companies authorized
to do business under the Illinois Corporate Fiduciary Act,

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licensees under the Consumer Installment Loan Act, real estate
brokers licensed pursuant to the Real Estate License Act of
2000, as such Acts are now or hereafter amended, and licensed
attorneys when engaged in the attorney-client relationship are
exempt from the escrow provisions of this Act. "Independent
Escrowee" does not include employees or independent
contractors of a title insurance company or title insurance
agent authorized by a title insurance company to perform
closing, escrow, or settlement services.
(10) "Single risk" means the insured amount of any title
insurance policy, except that where 2 or more title insurance
policies are issued simultaneously covering different estates
in the same real property, "single risk" means the sum of the
insured amounts of all such title insurance policies. Any title
insurance policy insuring a mortgage interest, a claim payment
under which reduces the insured amount of a fee or leasehold
title insurance policy, shall be excluded in computing the
amount of a single risk to the extent that the insured amount
of the mortgage title insurance policy does not exceed the
insured amount of the fee or leasehold title insurance policy.
(11) "Department" means the Department of Financial and
Professional Regulation.
(12) "Secretary" means the Secretary of Financial and
Professional Regulation.
(13) "Insured closing letter" or "closing protection
letter" means an indemnification or undertaking to a party to a

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real property transaction, from a principal such as a title
insurance company, setting forth in writing the extent of the
title insurance company's principal's responsibility for
intentional misconduct or errors in closing the real property
transaction on the part of a settlement agent, such as a title
insurance agent or other settlement service provider, and
includes protection afforded pursuant to subsections (f), (g),
and (h) of Section 16 and Section 16.1 of this Act even if such
protection is afforded by contract.
(14) "Residential real property" means a building or
buildings consisting of one to 4 residential units or a
residential condominium unit where at least one of the
residential units or condominium units is occupied or intended
to be occupied as a residence by the purchaser or borrower, or
in the event that the purchaser or borrower is the trustee of a
trust, by a beneficiary of that trust.
(15) "Financial institution" means any bank subject to the
Illinois Banking Act, any savings and loan association subject
to the Illinois Savings and Loan Act of 1985, any savings bank
subject to the Savings Bank Act, any credit union subject to
the Illinois Credit Union Act, and any federally chartered
commercial bank, savings and loan association, savings bank, or
credit union organized and operated in this State pursuant to
the laws of the United States.
(Source: P.A. 98-387, eff. 8-16-13.)

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(215 ILCS 155/16) (from Ch. 73, par. 1416)
Sec. 16. Title insurance agents.
(a) No person, firm, partnership, association, corporation
or other legal entity shall act as or hold itself out to be a
title insurance agent unless duly registered by a title
insurance company with the Secretary.
(b) Each application for registration shall be made on a
form specified by the Secretary and prepared by each title
insurance company which the agent represents. The title
insurance company shall retain the copy of the application and
forward a copy to the Secretary.
(c) Every applicant for registration, except a firm,
partnership, association, limited liability company, or
corporation, must be 18 years or more of age. Included in every
application for registration of a title insurance agent,
including a firm, partnership, association, limited liability
company, or corporation, shall be an affidavit of the applicant
title insurance agent, signed and notarized in front of a
notary public, affirming that the applicant and every owner,
officer, director, principal, member, or manager of the
applicant has never been convicted or pled guilty to any felony
or misdemeanor involving a crime of theft or dishonesty or
otherwise accurately disclosing any such felony or misdemeanor
involving a crime of theft or dishonesty. No person who has had
a conviction or pled guilty to any felony or misdemeanor
involving theft or dishonesty may be registered by a title

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

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

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seller, buyer, borrower, and lender. A closing protection
letter shall not be issued by a title insurance agent, an
independent escrowee, or any other person or entity other than
a title insurance company. The provisions of this subsection
(f) shall not apply to the authority of a title insurance agent
to act as an escrow agent under subsection (g) of Section 17 of
this Act.
(g) If an agency contract between the title insurance
company and the title insurance agent is the source of the
authority under subsection (f) of this Section for a title
insurance agent to act as escrow agent for a real property
transaction, then the agency contract shall provide for no less
protection from the title insurance company to all parties to
the real property transaction than the title insurance company
would have provided to those parties had the title insurance
company issued a closing protection letter in conformity with
Section 16.1 of this Act.
(h) A title insurance company shall be liable for the acts
or omissions of its title insurance agent as an escrow agent if
the title insurance company has authorized the title insurance
agent under subsections (f) and (g) of this Section 16 and only
to the extent of the liability undertaken by the title
insurance company in the agency agreement or closing protection
letter. The liability, if any, of the title insurance agent to
the title insurance company for acts and omissions of the title
insurance agent as an escrow agent shall not be limited or

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otherwise modified because the title insurance company has
provided closing protection to a party or parties to a real
property transaction escrow, settlement, or closing. The
escrow agent shall not charge a fee for protection provided by
a title insurance company to parties to real property
transactions under subsections (f) and (g) of this Section 16
and Section 16.1, but shall collect from the parties the fee
charged by the title insurance company and shall promptly remit
the fee to the title insurance company. The title insurance
company may charge the parties a reasonable fee for protection
provided pursuant to subsections (f) and (g) of this Section 16
and Section 16.1 and shall not pay any portion of the fee to
the escrow agent. The payment of any portion of the fee to the
escrow agent by the title insurance company, shall be deemed a
prohibited inducement or compensation in violation of Section
24 of this Act.
(i) The Secretary shall adopt and amend such rules as may
be required for the proper administration and enforcement of
this Section 16 consistent with the federal Real Estate
Settlement Procedures Act and Section 24 of this Act.
(Source: P.A. 98-398, eff. 1-1-14; 98-832, eff. 1-1-15; 99-104,
eff. 1-1-16.)
(215 ILCS 155/17) (from Ch. 73, par. 1417)
Sec. 17. Independent escrowees.
(a) Every independent escrowee shall be subject to the same

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certification and deposit requirements to which title
insurance companies are subject under Section 4 of this Act.
(b) No person, firm, corporation or other legal entity
shall hold itself out to be an independent escrowee unless it
has been issued a certificate of authority by the Secretary.
(c) Every applicant for a certificate of authority, except
a firm, partnership, association or corporation, must be 18
years or more of age.
(d) Every certificate of authority shall remain in effect
one year unless revoked or suspended by the Secretary or
voluntarily surrendered by the holder.
(e) An independent escrowee may engage in the escrow,
settlement, or closing business, or any combination of such
business, and operate as an escrow, settlement, or closing
agent, provided that:
(1) Funds deposited in connection with any escrow,
settlement, or closing shall be deposited in a separate
fiduciary trust account or accounts in a bank or other
financial institution insured by an agency of the federal
government unless the instructions provide otherwise. Such
funds shall be the property of the person or persons
entitled thereto under the provisions of the escrow,
settlement, or closing and shall be segregated by escrow,
settlement or closing in the records of the independent
escrowee. Such funds shall not be subject to any debts of
the escrowee and shall be used only in accordance with the

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terms of the individual escrow, settlement or closing under
which the funds were accepted.
(2) Interest received on funds deposited with the
independent escrowee in connection with any escrow,
settlement or closing shall be paid to the depositing party
unless the instructions provide otherwise.
(3) The independent escrowee shall maintain separate
records of all receipt and disbursement of escrow,
settlement or closing funds.
(4) The independent escrowee shall comply with any
rules or regulations promulgated by the Secretary
pertaining to escrow, settlement or closing transactions.
(f) The Secretary or his authorized representative shall
have the power and authority to visit and examine at any time
any independent escrowee certified under this Act and to verify
and compel compliance with the provisions of this Act.
(g) A title insurance company or title insurance agent, not
qualified as an independent escrowee, may act in the capacity
of an escrow agent when it is supplying an abstract of title,
grantor-grantee search, tract search, lien search, tax
assessment search, or other limited purpose search to the
parties to the transaction even if it is not issuing a title
insurance commitment or title insurance policy. A title
insurance agent may act as an escrow agent only when
specifically authorized in writing on forms prescribed by the
Secretary by a title insurance company that has duly registered

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