Illinois General Assembly - Full Text of Public Act 096-1454
Illinois General Assembly

Previous General Assemblies

Public Act 096-1454


 

Public Act 1454 96TH GENERAL ASSEMBLY

  
  
  

 


 
Public Act 096-1454
 
HB5409 EnrolledLRB096 18556 RPM 33938 b

    AN ACT concerning insurance.
 
    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 and 16 and by adding Section 16.1 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
        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
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:
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 reports,
binders or commitments to insure and policies, and endorsements
of the title insurance company; in its behalf, 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
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,
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
real property estate transaction, from a principal such as a
title insurance company or similar entity, setting forth in
writing the extent of the principal's responsibility for
intentional misconduct or errors in closing the real property
estate 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.
(Source: P.A. 94-893, eff. 6-20-06; 95-570, eff. 8-31-07.)
 
    (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 in duplicate by
each title insurance company which the agent represents. The
title insurance company shall retain the copy of the
application and forward the original to the Secretary with the
appropriate fee.
    (c) Every applicant for registration, except a firm,
partnership, association or corporation, must be 18 years or
more of age.
    (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
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
seller, buyer, borrower, and lender. A closing protection
letter shall not be issued by a title insurance agent. 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
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. 94-893, eff. 6-20-06.)
 
    (215 ILCS 155/16.1 new)
    Sec. 16.1. Closing or settlement protection.
    (a) Notwithstanding the provisions of item (iii) of
paragraph (B) of subsection (1) and subsections (3) and (8) of
Section 3 and Section 16 of this Act, a title insurance company
or title insurance agent is not authorized to 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 as part of the same transaction a
commitment, binder, or title insurance policy and closing
protection letters protecting the buyer's or borrower's,
lender's, and seller's interests have been issued by the title
insurance company on whose behalf the commitment, binder, or
title insurance policy has been issued. Closing protection
letters are not required when the authorization for the title
insurance agent to act as an escrow agent is given by an agency
contract with the title insurance company pursuant to
subsections (f), (g), and (h) of Section 16 of this Act, but
shall be issued by the title insurance company upon the request
of a party to 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.
    (b) Unless otherwise agreed to between a title insurance
company and a protected person or entity, a closing protection
letter under this Section shall indemnify all parties to a real
property transaction against actual loss, not to exceed the
amount of the settlement funds deposited with the escrow agent.
The closing protection letter shall in any event indemnify all
parties to a real property transaction when such losses arise
out of:
        (1) failure of the escrow agent to comply with written
    closing instructions to the extent that they relate to (A)
    the status of the title to an interest in land or the
    validity, enforceability, and priority of the lien of a
    mortgage on an interest in land, including the obtaining of
    documents and the disbursement of funds necessary to
    establish the status of title or lien or (B) the obtaining
    of any other document specifically required by a party to
    the real property transaction, but only to the extent that
    the failure to obtain such other document affects the
    status of the title to an interest in land or the validity,
    enforceability, and priority of the lien of a mortgage on
    an interest in land; or
        (2) fraud, dishonesty, or negligence of the escrow
    agent in handling funds or documents in connection with
    closings to the extent that the fraud, dishonesty, or
    negligence relates to the status of the title to the
    interest in land or to the validity, enforceability, and
    priority of the lien of a mortgage on an interest in land
    or, in the case of a seller, to the extent that the fraud,
    dishonesty, or negligence relates to funds paid to or on
    behalf of, or which should have been paid to or on behalf
    of, the seller.
    (c) The indemnification under a closing protection letter
may include limitations on the liability of the title insurance
company for any of the following:
        (1) Failure of the escrow agent to comply with closing
    instructions that require title insurance protection
    inconsistent with that set forth in the title insurance
    commitment for the real property transaction. Instructions
    that require the removal of specific exceptions to title or
    compliance with the requirements contained in the title
    insurance commitment shall not be deemed to be
    inconsistent.
        (2) Loss or impairment of funds in the course of
    collection or while on deposit with a bank due to bank
    failure, insolvency, or suspension, except such as shall
    result from failure of the escrow agent closer to comply
    with written closing instructions to deposit the funds in a
    bank that is designated by name by a party to the real
    property transaction.
        (3) Mechanics' and materialmen's liens in connection
    with sale, purchase, lease, or construction loan
    transactions, except to the extent that protection against
    such liens is afforded by a title insurance commitment or
    policy issued by the escrow agent.
        (4) Failure of the escrow agent to comply with written
    closing instructions to the extent that such instructions
    require a determination by the escrow agent of the
    validity, enforceability, or effectiveness of any document
    described in subitem (B) of item (1) of subsection (b) of
    this Section.
        (5) Fraud, dishonesty, or negligence of an employee,
    agent, attorney, or broker, who is not also the escrow
    agent or an independent contract closer of the escrow
    agent, of the indemnified party to the real property
    transaction.
        (6) The settlement or release of any claim by the
    indemnified party to the real property transaction without
    the written consent of the title insurance company.
        (7) Any matters created, suffered, assumed, or agreed
    to by, or known to, the indemnified party to the real
    property transaction without the written consent of the
    title insurance company.
    The closing protection letter may also include reasonable
additional provisions concerning the dollar amount of
protection, provided such limit is not less than the amount
deposited with the escrow agent, arbitration, subrogation,
claim notices, and other conditions and limitations that do not
materially impair the protection required by this Section 16.1.
    (d) This Section shall not apply to the authority of a
title insurance company and title insurance agent to act as an
escrow agent under subsection (g) of Section 17 of this Act.
    (e) The Secretary shall adopt and amend such rules as may
be required for the proper administration and enforcement of
this Section 16.1 consistent with the federal Real Estate
Settlement Procedures Act and Section 24 of this Act.
 
    Section 99. Effective date. This Act takes effect January
1, 2011.

Effective Date: 1/1/2011