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Senate Study Bill 1127

Bill Text

PAG LIN
  1  1    Section 1.  NEW SECTION.  515H.1  SHORT TITLE.
  1  2    1.  This chapter shall be known as the "Iowa Title
  1  3 Insurance Agents Act".
  1  4    2.  The purpose of this chapter is to provide the state of
  1  5 Iowa with a comprehensive body of law for the effective
  1  6 regulation and supervision of title insurance agents.
  1  7    Sec. 2.  NEW SECTION.  515H.2  DEFINITIONS.
  1  8    As used in this chapter, unless the context otherwise
  1  9 requires:
  1 10    1.  "Abstract of title" or "abstract" means a written
  1 11 history, synopsis, or summary of the recorded instruments
  1 12 affecting title to real property.
  1 13    2.  "Affiliated business" means any portion of a title
  1 14 insurance agent's business written in this state that was
  1 15 referred to the agent by a producer of title insurance
  1 16 business or by an associate of the producer, where the
  1 17 producer or associate, or both, have a financial interest in
  1 18 the title insurance agent.
  1 19    3.  "Associate" means any of the following:
  1 20    a.  A business organized for profit in which a producer of
  1 21 title business is a director, officer, partner, employee, or
  1 22 owner of a financial interest.
  1 23    b.  An employee of a producer of title business.
  1 24    c.  A franchiser or franchisee of a producer of title
  1 25 business.
  1 26    d.  A spouse, parent, or child of a producer of title
  1 27 insurance business who is a natural person.
  1 28    e.  A person, other than a natural person, that controls,
  1 29 is controlled by, or is under common control with a producer
  1 30 of title business.
  1 31    f.  A person with whom a producer of title insurance
  1 32 business or any associate of the producer of title insurance
  1 33 business has an agreement, arrangement, or understanding, or
  1 34 pursues a course of conduct, the purpose or effect of which is
  1 35 to provide financial benefits to that producer or associate
  2  1 for the referral of business.
  2  2    4.  "Bona fide employee" of the title insurer or title
  2  3 insurance agent means an individual who devotes substantially
  2  4 all of that individual's time to performing services on behalf
  2  5 of a title insurer or title insurance agent and whose
  2  6 compensation for these services is in the form of salary or
  2  7 its equivalent paid by the title insurer or title insurance
  2  8 agent.
  2  9    5.  "Commissioner" means the commissioner of insurance of
  2 10 this state, or the commissioner's representatives, or the
  2 11 commissioner, director, or superintendent of insurance in any
  2 12 other state.
  2 13    6.  "Escrow" means a written instrument, money, or other
  2 14 item deposited by one person with a depository, escrow agent,
  2 15 or escrowee for delivery to another person upon the
  2 16 performance of a specified condition or the happening of a
  2 17 certain event.
  2 18    7.  "Financial interest" means a direct or indirect
  2 19 interest, legal or beneficial, where the holder is or will be
  2 20 entitled to five percent or more of the net profits or net
  2 21 worth of the entity in which the interest is held.
  2 22    8.  "Foreign title insurer" means a title insurer
  2 23 incorporated or organized under the laws of any other state of
  2 24 the United States, the District of Columbia, or any other
  2 25 jurisdiction of the United States.
  2 26    9.  "Non-United States title insurer" means a title insurer
  2 27 incorporated or organized under the laws of any foreign nation
  2 28 or any foreign province or territory.
  2 29    10.  "Person" means a natural person, partnership,
  2 30 association, cooperative, corporation, trust, or other legal
  2 31 entity.
  2 32    11.  "Producer" means a person, including an officer,
  2 33 director, or owner of five percent or more of the equity or
  2 34 capital of any person, engaged in this state in the trade,
  2 35 business, occupation, or profession of any of the following:
  3  1    a.  Buying or selling interests in real property.
  3  2    b.  Making loans secured by interests in real property.
  3  3    c.  Acting as broker, agent, representative, or attorney of
  3  4 a person who buys or sells an interest in real property, or
  3  5 who lends or borrows moneys with the interest as security.
  3  6    12.  "Qualified financial institution" means an institution
  3  7 that is all of the following:
  3  8    a.  Organized or, in the case of a United States branch or
  3  9 agency office of a foreign banking organization, licensed
  3 10 under the laws of the United States or any state and has been
  3 11 granted authority to operate with fiduciary powers.
  3 12    b.  Regulated, supervised, and examined by federal or state
  3 13 authorities having regulatory authority over banks and trust
  3 14 companies.
  3 15    c.  Insured by the appropriate federal entity.
  3 16    d.  Qualified under any additional rules established by the
  3 17 commissioner.
  3 18    13.  "Referral" means the direction or exercise of any
  3 19 power or influence over the direction of title insurance
  3 20 business, whether or not the consent or approval of any other
  3 21 person is sought or obtained with respect to the referral.
  3 22    14.  "Security" or "security deposit" means funds or other
  3 23 property received by a title insurance agent as collateral to
  3 24 secure an indemnitor's obligation under an indemnity agreement
  3 25 pursuant to which a title insurer is granted a perfected
  3 26 security interest in the collateral in exchange for agreeing
  3 27 to provide coverage in a title insurance policy for a specific
  3 28 title exception to coverage.
  3 29    15.  "Title insurance agent" means an authorized person,
  3 30 other than a bona fide employee of a title insurer who, on
  3 31 behalf of a title insurer, performs any of the following acts,
  3 32 in conjunction with the issuance of a title insurance report
  3 33 or policy:
  3 34    a.  Determines insurability and issues title insurance
  3 35 reports or policies, or both, based upon the performance or
  4  1 review of a search or abstract of title.
  4  2    b.  Performs one or more of the following functions:
  4  3    (1)  Collects or disburses premiums, escrow or security
  4  4 deposits, or other funds.
  4  5    (2)  Handles escrow, settlements, or closings.
  4  6    (3)  Solicits or negotiates title insurance business.
  4  7    (4)  Records closing documents.
  4  8    16.  "Title insurance business" or "business of title
  4  9 insurance" means engaging in any of the following:
  4 10    a.  Issuing or offering to issue as an insurer a title
  4 11 insurance policy.
  4 12    b.  Transacting or proposing to transact by a title
  4 13 insurance agent any of the following activities when conducted
  4 14 or performed in contemplation of or in conjunction with the
  4 15 issuance of a title insurance policy:
  4 16    (1)  Soliciting or negotiating the issuance of a title
  4 17 insurance policy.
  4 18    (2)  Guaranteeing, warranting, or otherwise insuring the
  4 19 correctness of title searches for all instruments affecting
  4 20 titles to real property, an interest in real property,
  4 21 cooperative units, and proprietary leases, and for all liens
  4 22 or charges affecting titles to real property, an interest in
  4 23 real property, cooperative units, and proprietary leases.
  4 24    (3)  Handling escrows, settlements, or closings.
  4 25    (4)  Executing title insurance policies.
  4 26    (5)  Effecting contracts of reinsurance.
  4 27    (6)  Abstracting, searching, or examining titles.
  4 28    c.  Guaranteeing, warranting, or insuring searches or
  4 29 examination of title to real property or any interest in real
  4 30 property.
  4 31    d.  Guaranteeing or warranting the status of title as to
  4 32 ownership of or liens on real property and personal property
  4 33 by any person other than the principals to the transaction.
  4 34    e.  Doing or proposing to do any business substantially
  4 35 equivalent to any of the activities listed in this subsection
  5  1 in a manner designed to evade the provisions of this chapter.
  5  2    17.  "Title insurance policy" means a contract insuring or
  5  3 indemnifying owners of, or other persons lawfully interested
  5  4 in, real or personal property or any interest in real
  5  5 property, against loss or damage arising from any of the
  5  6 following conditions existing on or before the initial date of
  5  7 policy coverage and not excepted or excluded:
  5  8    a.  Defects in, or liens or encumbrances on, the insured
  5  9 title.
  5 10    b.  Unmarketability of the insured title.
  5 11    c.  Invalidity, lack of priority, or unenforceability of
  5 12 liens or encumbrances on the stated property.
  5 13    d.  Lack of legal right of access to the land.
  5 14    e.  Unenforceability of rights in title to the land.
  5 15    18.  "Title insurance report" means a preliminary report,
  5 16 commitment, or binder issued prior to the issuance of a title
  5 17 insurance policy containing the terms, conditions, exceptions,
  5 18 and any other matters incorporated by reference under which
  5 19 the title insurer is willing to issue its title insurance
  5 20 policy.
  5 21    19.  "Title insurance subagent" means a person, other than
  5 22 a bona fide employee of a title insurance agent who, on behalf
  5 23 of the title insurance agent, determines insurability and
  5 24 issues title insurance reports or policies, or both, based
  5 25 upon the performance or review of a search or abstract of
  5 26 title, except that the performance of actual legal services
  5 27 such as title examination or closing services by a licensed
  5 28 attorney does not render the attorney a subagent.
  5 29    20.  "Title insurer" means a company organized under the
  5 30 laws of this state for the purpose of transacting the business
  5 31 of title insurance and any foreign title insurer or non-United
  5 32 States title insurer licensed in this state to transact the
  5 33 business of title insurance.
  5 34    21.  "Underwrite" means the authority to accept or reject
  5 35 risk on behalf of a title insurer.
  6  1    Sec. 3.  NEW SECTION.  515H.3  LICENSING REQUIREMENTS.
  6  2    1.  A person shall not act in the capacity of a title
  6  3 insurance agent, and a title insurer shall not contract with
  6  4 any person to act in the capacity of a title insurance agent
  6  5 with respect to risks located in this state unless the person
  6  6 is licensed as a title insurance agent in this state.
  6  7    2.  A title insurance agent licensed in this state shall do
  6  8 all of the following:
  6  9    a.  Refrain from using the word "insurer" or "underwriter"
  6 10 or similar term in the name of the title insurance agency.
  6 11    b.  Provide, in a timely fashion, each title insurer with
  6 12 which it places business any information the title insurer
  6 13 requests in order to comply with reporting requirements of the
  6 14 commissioner.
  6 15    3.  The commissioner shall require a title insurance agent
  6 16 and any designee of the title insurance agent performing title
  6 17 searches to maintain, for the benefit of the title insurer, in
  6 18 amounts commensurate with the agent's average exposure, under
  6 19 terms and conditions, and from insurers acceptable to the
  6 20 commissioner, all of the following:
  6 21    a.  An error and omission policy which includes coverage
  6 22 for an agent's delegation of any of the agent's functions.
  6 23    b.  Fidelity coverage if the agent handles escrow or
  6 24 security deposits.
  6 25    The commissioner may adopt rules pursuant to chapter 17A
  6 26 specifying acceptable alternatives to the requirements of this
  6 27 subsection.  The availability of closing or settlement
  6 28 protection shall not be construed to be an acceptable
  6 29 alternative to the requirements of this subsection.
  6 30    Sec. 4.  NEW SECTION.  515H.4  INSPECTION OF BOOKS AND
  6 31 RECORDS.
  6 32    The commissioner may, during normal business hours,
  6 33 examine, audit, and inspect any and all books and records
  6 34 required to be maintained by a title insurance agent under
  6 35 this chapter.
  7  1    Sec. 5.  NEW SECTION.  515H.5  PROHIBITIONS RELATING TO
  7  2 REFERRALS.
  7  3    A title insurance agent or other person shall not provide
  7  4 or receive, directly or indirectly, any consideration for the
  7  5 referral of title insurance business or escrow or other
  7  6 services provided by a title insurance agent unless goods or
  7  7 services are provided in conjunction with such a referral.
  7  8    Sec. 6.  NEW SECTION.  515H.6  AFFILIATED BUSINESS
  7  9 PROVISIONS.
  7 10    1.  Whenever business constitutes affiliated business,
  7 11 prior to commencing such a business transaction, the title
  7 12 insurance agent shall ensure that the title insurance agent's
  7 13 customer has been provided with disclosure of the existence of
  7 14 the affiliated business arrangement and a written estimate of
  7 15 the charge or range of charges generally made for the title
  7 16 insurance business services provided by the title insurance
  7 17 agent.
  7 18    2.  The commissioner may adopt rules pursuant to chapter
  7 19 17A requiring title insurance agents to record and report the
  7 20 title insurance agent's owners and all of the title insurance
  7 21 agent's ownership interests in other persons or businesses,
  7 22 and to record and report material transactions between the
  7 23 title insurance agents and other persons or businesses.
  7 24    3.  This chapter shall not be construed as prohibiting
  7 25 affiliated business arrangements in the provision of title
  7 26 insurance business if all of the following apply:
  7 27    a.  The title insurance agent or party making a referral
  7 28 constituting affiliated business, at or prior to the time of
  7 29 the referral, discloses the arrangement and, in connection
  7 30 with the referral, provides the person being referred with a
  7 31 written estimate of the charge or range of charges likely to
  7 32 be assessed, and otherwise complies with the disclosure
  7 33 obligations of this section.
  7 34    b.  The person being referred is not required to use a
  7 35 specified title insurance agent or title insurer.
  8  1    c.  The only thing of value that is received by the title
  8  2 insurance agent or party making the referral, other than
  8  3 payments otherwise permitted, is a return on an ownership
  8  4 interest.  For purposes of this subsection, the terms
  8  5 "required use" and "return on ownership interest" have the
  8  6 meanings accorded to them under the federal Real Estate
  8  7 Settlement Procedures Act, 12 U.S.C. } 2607, et seq., and
  8  8 Regulation X, 24 C.F.R. pt. 3500.
  8  9    Sec. 7.  NEW SECTION.  515H.7  FAVORED AGENT OR TITLE
  8 10 INSURER.
  8 11    A title insurance agent shall not participate in any
  8 12 transaction in which a producer or other person requires,
  8 13 directly or indirectly, or through a trustee, director,
  8 14 officer, agent, employee, or affiliate, as a condition,
  8 15 agreement, or understanding to providing, selling, or
  8 16 furnishing any other person a loan, loan extension, credit,
  8 17 sale, property, contract, lease, or service, that the other
  8 18 person must place a title insurance policy of any kind with a
  8 19 particular title insurer or through a particular title
  8 20 insurance agent.
  8 21    Sec. 8.  NEW SECTION.  515H.8  REQUIRED PROVISIONS OF
  8 22 UNDERWRITING CONTRACT WITH TITLE INSURER.
  8 23    A person acting in the capacity of a title insurance agent
  8 24 shall not place business with a title insurer unless there is
  8 25 in force a written contract between the title insurance agent
  8 26 and the title insurer which sets forth the responsibilities of
  8 27 each party to the contract.  Where the title insurance agent
  8 28 and the title insurer share responsibility for a particular
  8 29 function, the contract shall specify the division of such
  8 30 responsibilities between them and shall contain language which
  8 31 provides for all of the following:
  8 32    1.  The title insurer may terminate the contract upon
  8 33 written notice of any of the following circumstances:
  8 34    a.  Fraud, insolvency, appointment of a receiver or
  8 35 conservator, bankruptcy, cancellation of the title insurance
  9  1 agent's license or permit to do business, or the commencement
  9  2 of legal proceedings by the state of domicile of the title
  9  3 insurance agent, which, if successful, would lead to
  9  4 cancellation of the title insurance agent's license to do
  9  5 business.
  9  6    b.  Material breach of any provisions of the contract.
  9  7    c.  Notice of cancellation has been provided in accordance
  9  8 with contract termination requirements.
  9  9    2.  Upon receiving notice of termination, the title
  9 10 insurance agent shall immediately discontinue all title
  9 11 insurance business activities on behalf of that title insurer.
  9 12 This subsection is not intended to relieve the title insurance
  9 13 agent or title insurer of any other contractual obligation.
  9 14    3.  The title insurance agent shall render accounts to the
  9 15 title insurer detailing all transactions and shall remit all
  9 16 funds due under the underwriting contract to the title insurer
  9 17 within the time specified by the underwriting contract.
  9 18    4.  All funds collected for the account of a title insurer
  9 19 by a title insurance agent shall be held in a fiduciary
  9 20 capacity in a bank that is a qualified financial institution.
  9 21    5.  At the title insurer's request, the title insurance
  9 22 agent, its successor in interest, transferee, or receiver
  9 23 shall provide access to and the right to copy all escrow files
  9 24 and underwriting files involving a transaction in which a
  9 25 title insurance report or policy has been or is to be issued.
  9 26    6.  Separate records of business written by the title
  9 27 insurance agent shall be maintained for each title insurer.
  9 28 The title insurer shall have access to and a right to copy all
  9 29 accounts and records related to its business in a form
  9 30 acceptable to the title insurer.  The commissioner shall have
  9 31 access to all books, bank accounts, and records of the title
  9 32 insurance agent in a form usable to the commissioner.  The
  9 33 records shall be retained according to section 515H.10.
  9 34    7.  An underwriting contract with a title insurer shall not
  9 35 be assigned in whole or in part by the title insurance agent
 10  1 without the express written consent of the title insurer.
 10  2    8.  The underwriting contract shall contain appropriate
 10  3 guidelines, relating to all of the following:
 10  4    a.  The basis of the rates to be charged.
 10  5    b.  The types of risks which may be underwritten.
 10  6    c.  Maximum limits of liability.
 10  7    d.  Territorial limitations.
 10  8    e.  Title searches and examinations.
 10  9    f.  Underwriting.
 10 10    9.  The title insurance agent shall immediately report and
 10 11 forward to the title insurer all title-related escrow claims
 10 12 and title claims reported to the title insurance agent by a
 10 13 policyholder or another person.  However, if the underwriting
 10 14 contract permits the title insurance agent to settle claims on
 10 15 behalf of the title insurer, all of the following shall apply:
 10 16    a.  A copy of the claim file shall be sent to the title
 10 17 insurer at its request or as soon as any of the following
 10 18 become known:
 10 19    (1)  The claim has the potential to exceed an amount
 10 20 established by the title insurer.
 10 21    (2)  The claim involves a coverage dispute.
 10 22    (3)  The claim may exceed the title insurance agent's
 10 23 settlement authority on claims.
 10 24    (4)  The claim is open for more than six months.
 10 25    (5)  The claim is closed by payment exceeding an amount
 10 26 established by the title insurer.
 10 27    b.  All title and title-related escrow claims files settled
 10 28 by the title insurance agent shall be the property of the
 10 29 title insurer.
 10 30    c.  Any settlement authority granted to the title insurance
 10 31 agent may be terminated immediately upon the title insurer's
 10 32 written notice to the title insurance agent or upon the
 10 33 termination of the underwriting contract.  The title insurer
 10 34 may suspend the settlement authority during the pendency of a
 10 35 dispute regarding the cause for termination.  This paragraph
 11  1 is not intended to relieve the title insurance agent or title
 11  2 insurer of any other contractual obligation.
 11  3    10.  If electronic claims files exist, the underwriting
 11  4 contract must address the immediate transmission of the data
 11  5 in the claims files.
 11  6    11.  The title insurance agent shall not bind reinsurance
 11  7 or retrocessions on behalf of the title insurer.
 11  8    12.  The underwriting contract shall include specific terms
 11  9 of a title insurance agent's compensation.
 11 10    13.  The title insurance agent shall maintain an inventory
 11 11 of all policy forms or policy numbers assigned to the title
 11 12 insurance agent by the title insurer.
 11 13    14.  The title insurance agent shall annually, concurrent
 11 14 with the renewal date of the underwriting contract, furnish
 11 15 the title insurer with proof that the title insurance agent is
 11 16 in compliance with section 515H.3.
 11 17    15.  The title insurance agent shall provide the title
 11 18 insurer with access and the right to copy all accounts and
 11 19 records maintained by the title insurance agent with respect
 11 20 to business placed with the title insurer.
 11 21    Sec. 9.  NEW SECTION.  515H.9  CONDITIONS FOR PROVIDING
 11 22 ESCROW, CLOSING, OR SETTLEMENT SERVICES, AND MAINTAINING
 11 23 ESCROW AND SECURITY DEPOSIT ACCOUNTS.
 11 24    A title insurance agent may operate as an escrow, security,
 11 25 settlement, or closing agent, provided all of the following
 11 26 apply:
 11 27    1.  All funds deposited with the title insurance agent in
 11 28 connection with an escrow, settlement, closing, or security
 11 29 deposit shall be submitted for collection to or deposited in a
 11 30 separate fiduciary trust account or accounts in a qualified
 11 31 financial institution no later than the close of the next
 11 32 business day after receipt of the funds, in accordance with
 11 33 all of the following requirements:
 11 34    a.  The funds shall be the property of the person or
 11 35 persons entitled to them under the provisions of the escrow,
 12  1 settlement, security deposit, or closing agreement, and shall
 12  2 be segregated for each depository by designating escrow,
 12  3 settlement, security deposit, or closing funds in the records
 12  4 of the title insurance agent in a manner that permits the
 12  5 funds to be identified on an individual basis.
 12  6    b.  The funds shall be applied only in accordance with the
 12  7 terms of the individual instructions or agreements under which
 12  8 the funds were accepted.
 12  9    2.  Funds held in an escrow account shall be disbursed only
 12 10 pursuant to a written instruction or agreement specifying how
 12 11 and to whom such funds may be disbursed.
 12 12    3.  Funds held in a security deposit account shall be
 12 13 disbursed only pursuant to a written agreement specifying all
 12 14 of the following:
 12 15    a.  What actions the indemnitor shall take to satisfy the
 12 16 indemnitor's obligation under the agreement.
 12 17    b.  The duties of the title insurance agent with respect to
 12 18 disbursements of the funds held, including a requirement to
 12 19 maintain evidence of the disbursements before any balance may
 12 20 be paid over to the depositing party, or the depositing
 12 21 party's designee.
 12 22    c.  Any other provisions the commissioner may require.
 12 23    4.  A disbursement may be made out of an escrow,
 12 24 settlement, or closing account only if deposits in amounts at
 12 25 least equal to the disbursement have first been made directly
 12 26 to the account against which the disbursement will be made,
 12 27 and if the deposits are in one of the following forms:
 12 28    a.  Cash.
 12 29    b.  Wire transfers such that the funds are unconditionally
 12 30 received by the title insurance agent or the title insurance
 12 31 agent's depository.
 12 32    c.  Cashier's checks, certified checks, bank money orders,
 12 33 and teller's checks issued by a federally insured financial
 12 34 institution and unconditionally held by the title insurance
 12 35 agent.
 13  1    d.  United States treasury checks, federal reserve bank
 13  2 checks, federal home loan bank checks, and state of Iowa
 13  3 warrants.
 13  4    e.  Personal checks up to one thousand dollars.
 13  5    For the purposes of this subsection, "federally insured
 13  6 financial institution" means an institution in which monetary
 13  7 deposits are insured by the federal deposit insurance
 13  8 corporation or national credit union administration.
 13  9    5.  If the title insurance agent is appointed by two or
 13 10 more title insurers and maintains fiduciary trust accounts in
 13 11 connection with providing escrow or closing settlement
 13 12 services, the title insurance agent shall allow each title
 13 13 insurer reasonable access to the accounts and all supporting
 13 14 account information in order to ascertain the safety and
 13 15 security of the funds held by the title insurance agent.
 13 16    6.  This chapter does not prohibit the recording of
 13 17 documents prior to the time funds are available for
 13 18 disbursement with respect to any transaction involving real
 13 19 property.
 13 20    7.  This section is not intended to amend, alter, or
 13 21 supersede other sections of this chapter, or the laws of this
 13 22 state or the United States, regarding an escrow holder's
 13 23 duties and obligations.
 13 24    Sec. 10.  NEW SECTION.  515H.10  RECORD RETENTION
 13 25 REQUIREMENTS.
 13 26    A title insurance agent shall maintain sufficient records
 13 27 of the affairs of the title insurance agent, including its
 13 28 escrow operations and escrow trust accounts, so that the
 13 29 commissioner may adequately ensure that the title insurance
 13 30 agent is in compliance with all provisions of this chapter.
 13 31 The commissioner may prescribe the specific record entries and
 13 32 documents to be kept, and the length of time for which the
 13 33 records must be maintained.
 13 34    Sec. 11.  NEW SECTION.  515H.11  APPLICATION OF OTHER
 13 35 INSURANCE CODE SECTIONS TO TITLE INSURANCE AGENTS.
 14  1    A title insurance agent shall be subject to all other
 14  2 applicable provisions of the insurance code applying to
 14  3 insurance and insurance agents which are not inconsistent with
 14  4 the purposes and provisions of this chapter.
 14  5    Sec. 12.  NEW SECTION.  515H.12  RULES AND REGULATIONS.
 14  6    The commissioner may adopt rules pursuant to chapter 17A
 14  7 and issue regulations and orders as may be necessary for the
 14  8 effective administration of this chapter.
 14  9    Sec. 13.  NEW SECTION.  515H.13  PENALTIES AND LIABILITIES.
 14 10    1.  If the commissioner determines that a title insurance
 14 11 agent or any other person has violated this chapter, any rule
 14 12 adopted pursuant to this chapter, or any regulation or order
 14 13 issued under this chapter, after notice and opportunity to be
 14 14 heard, the commissioner may order any or all of the following:
 14 15    a.  A civil penalty not exceeding one hundred dollars for
 14 16 each violation.
 14 17    b.  Revocation or suspension of the title insurance agent's
 14 18 license.
 14 19    2.  If an order of rehabilitation or liquidation of the
 14 20 title insurer has been entered pursuant to chapter 507C, and
 14 21 the receiver appointed under that order determines that the
 14 22 title insurance agent or any other person has not complied
 14 23 with the requirements of this chapter, or any related rule,
 14 24 regulation, or order, and the title insurer has suffered
 14 25 resulting loss or damage, the receiver may maintain a civil
 14 26 action for recovery of damages or other appropriate sanctions
 14 27 for the benefit of the title insurer and its policyholders and
 14 28 creditors.
 14 29    3.  This section shall not affect the right of the
 14 30 commissioner to impose any other civil penalties provided for
 14 31 in the insurance code.
 14 32    4.  This chapter is not intended to and shall not in any
 14 33 manner limit or restrict the rights of policyholders,
 14 34 claimants, and creditors.
 14 35    Sec. 14.  NEW SECTION.  515H.14  VIOLATIONS OF THE REAL
 15  1 ESTATE SETTLEMENT PROCEDURES ACT.
 15  2    The commissioner or attorney general may bring an action in
 15  3 a court of competent jurisdiction to enjoin violations of the
 15  4 federal Real Estate Settlement Procedures Act, 12 U.S.C. }
 15  5 2607, et seq.
 15  6    Sec. 15.  NEW SECTION.  515I.1  TITLE AND PURPOSE.
 15  7    1.  This chapter shall be known as the "Iowa Title Insurers
 15  8 Act".
 15  9    2.  The purpose of this chapter is to provide for the
 15 10 effective regulation and supervision of title insurance and
 15 11 insurers licensed to write title insurance in this state.
 15 12    Sec. 16.  NEW SECTION.  515I.2  APPLICATION OF CHAPTER AND
 15 13 CONSTRUCTION WITH OTHER LAWS.
 15 14    1.  This chapter shall apply to all persons engaged in the
 15 15 business of title insurance in this state.
 15 16    2.  A title insurer shall be subject to all other
 15 17 applicable provisions of the insurance code applying to
 15 18 insurance and insurance companies which are not inconsistent
 15 19 with the purposes and provisions of this chapter.
 15 20    Sec. 17.  NEW SECTION.  515I.3  DEFINITIONS.
 15 21    As used in this chapter, unless the context otherwise
 15 22 requires:
 15 23    1.  "Abstract of title" or "abstract" means a written
 15 24 history, synopsis, or summary of the recorded instruments
 15 25 affecting the title to real property.
 15 26    2.  "Affiliate" means a specific person that directly, or
 15 27 indirectly through one or more intermediaries, controls, or is
 15 28 controlled by or is under common control with, the person
 15 29 specified.
 15 30    3.  "Bona fide employee" of a title insurer or title
 15 31 insurance agent means an individual who devotes substantially
 15 32 all of that individual's time to performing services on behalf
 15 33 of a title insurer or title insurance agent and whose
 15 34 compensation for those services is in the form of salary or
 15 35 its equivalent paid by the title insurer or title insurance
 16  1 agent.
 16  2    4.  "Commissioner" means the commissioner of insurance of
 16  3 this state, or the commissioner's representatives, or the
 16  4 commissioner, director, or superintendent of insurance in any
 16  5 other state.
 16  6    5.  "Control", "controlling", "is controlled by", or "is
 16  7 under common control with" means the direct or indirect power
 16  8 to determine the management and policies of a person, whether
 16  9 through the ownership of voting securities, by a contract
 16 10 other than a commercial contract for goods or nonmanagement
 16 11 services, or otherwise, unless the power is the result of an
 16 12 official position or corporate office held by the person
 16 13 exercising the power.  Control is presumed to exist if a
 16 14 person, directly or indirectly, owns, controls, holds the
 16 15 power to vote, or holds proxies representing ten percent or
 16 16 more of the voting securities of another person.  This
 16 17 presumption may be rebutted by a showing that control does not
 16 18 exist in fact.  The commissioner may determine, after
 16 19 furnishing all persons in interest notice and opportunity to
 16 20 be heard and making specific findings of fact to support the
 16 21 determination, that control exists in fact, notwithstanding
 16 22 the absence of a presumption to that effect.
 16 23    6.  "Direct operations" means that portion of a title
 16 24 insurer's operations which are attributable to business
 16 25 written by a bona fide employee.
 16 26    7.  "Escrow" means a written instrument, money, or other
 16 27 item deposited by one person with a depository, escrow agent,
 16 28 or escrowee for delivery to another person upon the
 16 29 performance of a specified condition or the happening of a
 16 30 certain event.
 16 31    8.  "Escrow, settlement or closing fee" means the
 16 32 consideration for supervising or handling the actual
 16 33 execution, delivery, or recording of transfer and lien
 16 34 documents, for disbursing funds, and for delivering items
 16 35 deposited in escrow.
 17  1    9.  "Foreign title insurer" means a title insurer
 17  2 incorporated or organized under the laws of any other state of
 17  3 the United States, the District of Columbia, or any other
 17  4 jurisdiction of the United States.
 17  5    10.  "Net retained liability" means the total liability
 17  6 retained by a title insurer for a single risk, after taking
 17  7 into account any ceded liability and collateral, which is
 17  8 acceptable to the commissioner to be maintained by the title
 17  9 insurer.
 17 10    11.  "Non-United States title insurer" means a title
 17 11 insurer incorporated or organized under the laws of any
 17 12 foreign nation or any foreign province or territory.
 17 13    12.  "Person" means a natural person, partnership,
 17 14 association, cooperative, corporation, trust, or other legal
 17 15 entity.
 17 16    13.  "Producer" means a person, including an officer,
 17 17 director or owner of five percent or more of the equity or
 17 18 capital of any person, engaged in this state in the trade,
 17 19 business, occupation, or profession of any of the following:
 17 20    a.  Buying or selling interests in real property.
 17 21    b.  Making loans secured by interests in real property.
 17 22    c.  Acting as broker, agent, representative, or attorney of
 17 23 a person who buys or sells an interest in real property, or
 17 24 who lends or borrows money with the interest as security.
 17 25    14.  "Qualified financial institution" means an institution
 17 26 that is all of the following:
 17 27    a.  Organized or, in the case of a United States branch or
 17 28 agency office of a foreign banking organization, licensed
 17 29 under the laws of the United States or any state and has been
 17 30 granted authority to operate with fiduciary powers.
 17 31    b.  Regulated, supervised, and examined by federal or state
 17 32 authorities having regulatory authority over banks and trust
 17 33 companies.
 17 34    c.  Insured by the appropriate federal entity.
 17 35    d.  Qualified under any additional rules established by the
 18  1 commissioner.
 18  2    15.  "Referral" means the direction or exercise of any
 18  3 power or influence over the direction of title insurance
 18  4 business, whether or not the consent or approval of any other
 18  5 person is sought or obtained with respect to the referral.
 18  6    16.  "Security" or "security deposit" means funds or other
 18  7 property received by a title insurer as collateral to secure
 18  8 an indemnitor's obligation under an indemnity agreement
 18  9 pursuant to which a title insurer is granted a perfected
 18 10 security interest in the collateral in exchange for agreeing
 18 11 to provide coverage in a title insurance policy for a specific
 18 12 title exception to coverage.
 18 13    17.  "Subsidiary" means an affiliate controlled by a person
 18 14 directly or indirectly through one or more intermediaries.
 18 15    18.  "Title insurance agent" means an authorized person,
 18 16 other than a bona fide employee of the title insurer who, on
 18 17 behalf of the title insurer, performs the following acts, in
 18 18 conjunction with the issuance of a title insurance report or
 18 19 policy:
 18 20    a.  Determines insurability and issues title insurance
 18 21 reports or policies, or both, based upon the performance or
 18 22 review of a search or abstract of title.
 18 23    b.  Performs one or more of the following functions:
 18 24    (1)  Collects or disburses premiums, escrow or security
 18 25 deposits, or other funds.
 18 26    (2)  Handles escrows, settlements, or closings.
 18 27    (3)  Solicits or negotiates title insurance business.
 18 28    (4)  Records closing documents.
 18 29    19.  "Title insurance business" or "business of title
 18 30 insurance" means engaging in any of the following:
 18 31    a.  Issuing or offering to issue as an insurer a title
 18 32 insurance policy.
 18 33    b.  Transacting or proposing to transact by a title insurer
 18 34 any of the following activities when conducted or performed in
 18 35 contemplation of or in conjunction with the issuance of a
 19  1 title insurance policy:
 19  2    (1)  Soliciting or negotiating the issuance of a title
 19  3 insurance policy.
 19  4    (2)  Guaranteeing, warranting, or otherwise insuring the
 19  5 correctness of title searches for all instruments affecting
 19  6 titles to real property, an interest in real property,
 19  7 cooperative units and proprietary leases, and for all liens or
 19  8 charges affecting titles to real property, an interest in real
 19  9 property, cooperative units, and proprietary leases.
 19 10    (3)  Handling escrows, settlements, or closings.
 19 11    (4)  Executing title insurance policies.
 19 12    (5)  Effecting contracts of reinsurance.
 19 13    (6)  Abstracting, searching, or examining titles.
 19 14    c.  Guaranteeing, warranting, or insuring searches or
 19 15 examinations of title to real property or any interest in real
 19 16 property.
 19 17    d.  Guaranteeing or warranting the status of title as to
 19 18 ownership of or liens on real property and personal property
 19 19 by any person other than the principals to the transaction.
 19 20    e.  Doing or proposing to do any business substantially
 19 21 equivalent to any of the activities listed in this subsection
 19 22 in a manner designed to evade the provisions of this chapter.
 19 23    20.  "Title insurance policy" means a contract insuring or
 19 24 indemnifiying owners of, or other persons lawfully interested
 19 25 in, real or personal property or any interest in real
 19 26 property, against loss or damage arising from any of the
 19 27 following conditions existing on or before the initial date of
 19 28 policy coverage and not excepted or excluded:
 19 29    a.  Defects in, or liens or encumbrances on, the insured
 19 30 title.
 19 31    b.  Unmarketability of the insured title.
 19 32    c.  Invalidity, lack of priority, or unenforceability of
 19 33 liens or encumbrances on the stated property.
 19 34    d.  Lack of legal right of access to the land.
 19 35    e.  Unenforceability of rights in title to the land.
 20  1    21.  "Title insurance report" means a preliminary report,
 20  2 commitment, or binder issued prior to the issuance of a title
 20  3 insurance policy containing the terms, conditions, exceptions,
 20  4 and any other matters incorporated by reference under which
 20  5 the title insurer is willing to issue its title insurance
 20  6 policy.
 20  7    22.  "Title insurer" means a company organized under the
 20  8 laws of this state for the purpose of transacting the business
 20  9 of title insurance and any foreign title insurer or non-United
 20 10 States title insurer licensed in this state to transact the
 20 11 business of title insurance.
 20 12    23.  "Title plant" means a set of records consisting of
 20 13 documents, maps, surveys, or entries affecting title to real
 20 14 property or any interest in or encumbrance on the property,
 20 15 which has been filed or recorded in the jurisdiction for which
 20 16 the title plant is established or maintained.
 20 17    Sec. 18.  NEW SECTION.  515I.4  CORPORATE FORM REQUIRED.
 20 18    A person other than a domestic, foreign, or non-United
 20 19 States title insurer organized on the stock plan and licensed
 20 20 in this state as a title insurer shall not issue a title
 20 21 insurance policy or otherwise transact the business of title
 20 22 insurance in this state.
 20 23    Sec. 19.  NEW SECTION.  515I.5  AUTHORIZED ACTIVITIES OF
 20 24 TITLE INSURERS.
 20 25    Subject to the exceptions and restrictions contained in
 20 26 this chapter, a title insurer may do all of the following:
 20 27    1.  Transact only title insurance business.
 20 28    2.  Reinsure title insurance policies.
 20 29    3.  Perform ancillary activities, unless prohibited by the
 20 30 commissioner, including examining title to real property and
 20 31 any interest in real property and procuring and furnishing
 20 32 related information about real property and relevant personal
 20 33 property, when not in contemplation of, or in conjunction
 20 34 with, the issuance of a title insurance policy.
 20 35    Sec. 20.  NEW SECTION.  515I.6  LIMITATIONS ON POWERS.
 21  1    1.  An insurer that transacts or is licensed to transact
 21  2 any class, type, or kind of business other than title
 21  3 insurance shall not be eligible for the issuance or renewal of
 21  4 a license to transact title insurance business in this state
 21  5 and shall not transact, underwrite, or issue title insurance
 21  6 in this state.
 21  7    2.  A title insurer shall not engage in the business of
 21  8 guaranteeing the payment of principal or interest of bonds or
 21  9 mortgages.
 21 10    3.  a.  Notwithstanding subsection 1, and to the extent
 21 11 such coverage is lawful within this state, a title insurer may
 21 12 issue closing or settlement protection to a proposed insured
 21 13 upon request if the title insurer issues a preliminary report,
 21 14 binder, or title insurance policy to a proposed insured.  Such
 21 15 closing or settlement protection shall conform to the terms of
 21 16 coverage and format required by the commissioner and may
 21 17 indemnify a proposed insured only against loss of settlement
 21 18 funds because of the following acts of a title insurer's named
 21 19 title insurance agent:
 21 20    (1)  Theft of settlement funds.
 21 21    (2)  Acquiescence in the failure of a proposed insured to
 21 22 comply with written closing instructions relating to title
 21 23 insurance coverage by the title insurance agent.
 21 24    b.  A title insurer shall not provide any other coverage
 21 25 which purports to indemnify against improper acts or omissions
 21 26 of a person with regard to escrow, settlement, or closing
 21 27 services.
 21 28    Sec. 21.  NEW SECTION.  515I.7  PAID-UP CAPITAL AND SURPLUS
 21 29 REQUIREMENTS.
 21 30    Before being licensed to transact title insurance business
 21 31 in this state, a title insurer shall establish and maintain a
 21 32 minimum of not less than five million dollars of capital and
 21 33 surplus, the entire amount of which shall be fully paid-up in
 21 34 cash and invested as provided by law.
 21 35    Sec. 22.  NEW SECTION.  515I.8  SINGLE RISK LIMIT.
 22  1    1.  The net retained liability of a title insurer for a
 22  2 single risk in regard to property, whether assumed directly or
 22  3 as reinsurance, shall not exceed the aggregate of fifty
 22  4 percent of surplus as regards policyholders plus the statutory
 22  5 premium reserve less the insurer's investment in title plants,
 22  6 all as shown in the most recent annual statement of the
 22  7 insurer on file with the commissioner.
 22  8    2.  For purposes of this chapter:
 22  9    a.  A single risk shall be the insured amount of any title
 22 10 insurance policy, except that, where two or more title
 22 11 insurance policies are issued simultaneously covering
 22 12 different estates in the same real property, a single risk
 22 13 shall be the sum of the insured amounts of all the title
 22 14 insurance policies.
 22 15    b.  A policy under which a claim payment reduces the amount
 22 16 of insurance under one or more other title insurance policies
 22 17 shall be included in computing the single risk sum only to the
 22 18 extent that its amount exceeds the aggregate amount of the
 22 19 policy or policies whose amount of insurance is reduced.
 22 20    Sec. 23.  NEW SECTION.  515I.9  ADMITTED ASSET STANDARDS.
 22 21    In determining the financial condition of a title insurer
 22 22 doing business under this chapter, the general investment
 22 23 provisions of section 515.35 shall apply, except that an
 22 24 investment in a title plant or plants in an amount equal to
 22 25 the actual cost shall be allowed as an admitted asset for
 22 26 title insurers.  The aggregate amount of the investment shall
 22 27 not exceed the lesser of twenty percent of admitted assets or
 22 28 forty percent of surplus to policyholders, as shown on the
 22 29 most recent annual statement of the title insurer on file with
 22 30 the commissioner.
 22 31    Sec. 24.  NEW SECTION.  515I.10  RESERVES.
 22 32    In determining the financial condition of a title insurer
 22 33 doing business under this chapter, the general provisions of
 22 34 the insurance code requiring the establishment of reserves
 22 35 sufficient to cover all known and unknown liabilities,
 23  1 including allocated and unallocated loss adjustment expenses,
 23  2 shall apply, except that a title insurer shall establish and
 23  3 maintain the following:
 23  4    1.  A known claim reserve in an amount estimated to be
 23  5 sufficient to cover all unpaid losses, claims, and allocated
 23  6 loss adjustment expenses arising under title insurance
 23  7 policies, guaranteed certificates of title, guaranteed
 23  8 searches and guaranteed abstracts of title, and all unpaid
 23  9 losses, claims and allocated loss adjustment expenses for
 23 10 which the title insurer may be liable, and for which the
 23 11 insurer has received notice by or on behalf of the insured,
 23 12 holder of a guarantee, or escrow or security depositor.
 23 13    2.  A statutory or unearned premium reserve consisting of
 23 14 one of the following:
 23 15    a.  The amount of statutory or unearned premium reserve
 23 16 required by the laws of the domiciliary state of the insurer
 23 17 if the insurer is a foreign title insurer or a non-United
 23 18 States title insurer.
 23 19    b.  If the insurer is a domestic insurer in this state, a
 23 20 statutory or unearned premium reserve consisting of the
 23 21 following:
 23 22    (1)  The amount of the statutory or unearned premium or
 23 23 reinsurance reserve required on the effective date of this
 23 24 Act, which amount shall be released in accordance with the law
 23 25 in effect at the time such sums were added to the reserve.
 23 26    (2)  Out of total charges for policies of title insurance
 23 27 written or assumed commencing with the effective date of this
 23 28 Act, and until December 31, 2004, which shall be added to and
 23 29 set aside in this reserve in an amount equal to 6 percent of
 23 30 the sum of the following items set forth in the title
 23 31 insurer's most recent annual statement on file with the
 23 32 commissioner including:
 23 33    (a)  Direct premiums written.
 23 34    (b)  Escrow and settlement service fees.
 23 35    (c)  Other title fees and service charges including fees
 24  1 for closing protection letters.
 24  2    (d)  Premiums for reinsurance assumed less premiums for
 24  3 reinsurance ceded during the year.
 24  4    (3)  Additions to the reserve on or after January 1, 2005,
 24  5 which shall be made out of total charges for title insurance
 24  6 policies and guarantees written, equal to the sum of the
 24  7 following items, as set forth in the title insurer's most
 24  8 recent annual statement on file with the commissioner:
 24  9    (a)  For each title insurance policy on a single risk
 24 10 written or assumed after January 1, 2005, twenty-five cents
 24 11 per one thousand dollars of net retained liability for
 24 12 policies under five hundred thousand dollars and twelve cents
 24 13 per one thousand dollars of net retained liability for
 24 14 policies of five hundred thousand dollars or more.
 24 15    (b)  Six percent of escrow, settlement, and closing fees
 24 16 collected in contemplation of the issuance of the title
 24 17 insurance policies or guarantees.
 24 18    c.  The aggregate of the amounts set aside in the statutory
 24 19 or unearned premium reserve in any calendar year pursuant to
 24 20 paragraph "b", subparagraphs (2) and (3), shall be released
 24 21 from the reserve and restored to net profits on July 1 of each
 24 22 of the following years after the year of addition over a
 24 23 period of twenty years pursuant to the following:  
 24 24                                                   Percentage of
 24 25                                                   the aggregate
 24 26 Year                                               sum restored
 24 27 Year 1 ...................................................  35%
 24 28 Years 2 and 3 ............................................  15%
 24 29 Year 4 ...................................................  10%
 24 30 Years 5 through 7 ........................................   3%
 24 31 Years 8 through 10 .......................................   2%
 24 32 Years 10 through 20 ......................................   1%
 24 33    d.  The insurer shall calculate an adjusted statutory or
 24 34 unearned premium reserve as of the effective date of this Act.
 24 35 The adjusted reserve shall be calculated as if paragraph "b",
 25  1 subparagraphs (2) and (3), and paragraph "c" had been in
 25  2 effect for all years beginning twenty years prior to the
 25  3 effective date of this Act.  For purposes of this calculation,
 25  4 the balance of the reserve as of that date shall be deemed to
 25  5 be zero.  If the adjusted reserve so calculated exceeds the
 25  6 aggregate amount set aside for statutory or unearned premiums
 25  7 in the insurer's annual statement on file with the
 25  8 commissioner on the effective date of this Act, the insurer
 25  9 shall, out of total charges for policies of title insurance,
 25 10 increase its statutory or unearned premium reserve by an
 25 11 amount equal to one-sixth of that excess in each of the
 25 12 succeeding six years, commencing with the calendar year that
 25 13 includes the effective date of this Act, until the entire
 25 14 excess has been added to the statutory or unearned premium
 25 15 reserve.
 25 16    e.  The aggregate of the amounts set aside in the adjusted
 25 17 statutory or unearned premium reserve in any calendar year as
 25 18 adjustments to the insurer's statutory or unearned premium
 25 19 reserve pursuant to paragraph "d" shall be released from the
 25 20 reserve and restored to net profits or equity if the additions
 25 21 required by paragraph "b" reduce equity directly, over a
 25 22 period not exceeding ten years pursuant to the following
 25 23 table:  
 25 24 Year of addition                                        Release
 25 25 Year 1* ................................  Equally over 10 years
 25 26 Year 2  .................................  Equally over 9 years
 25 27 Year 3  .................................  Equally over 8 years
 25 28 Year 4  .................................  Equally over 7 years
 25 29 Year 5  .................................  Equally over 6 years
 25 30 Year 6  .................................  Equally over 5 years
 25 31 *"Year 1" means the calendar year following 
 25 32 the effective date of this Act.
 25 33    3.  A supplemental reserve consisting of any other reserves
 25 34 necessary, when taken in combination with the reserves
 25 35 required by subsections 1 and 2, to cover the title insurer's
 26  1 liabilities with respect to all losses, claims, and loss
 26  2 adjusted expenses.
 26  3    4.  An actuarial certification by a member in good standing
 26  4 of the American academy of actuaries filed with the title
 26  5 insurer's annual statement that conforms to the national
 26  6 association of insurance commissioners' annual statement
 26  7 instructions for title insurers.
 26  8    5.  The supplemental reserve required under subsection 3
 26  9 shall be phased in as follows:  twenty-five percent of the
 26 10 otherwise applicable supplemental reserve will be required
 26 11 until December 31, 2004; fifty percent of the otherwise
 26 12 applicable supplemental reserve will be required until
 26 13 December 31, 2005; and, seventy-five percent of the otherwise
 26 14 applicable supplemental reserve will be required until
 26 15 December 31, 2006.
 26 16    Sec. 25.  NEW SECTION.  515I.11  LIQUIDATION, DISSOLUTION,
 26 17 OR INSOLVENCY.
 26 18    1.  Chapter 507C shall apply to all title insurers subject
 26 19 to this chapter, except as otherwise provided in this section.
 26 20 In applying the provisions of chapter 507C, the court shall
 26 21 consider the unique aspects of title insurance and shall have
 26 22 broad authority to fashion relief that provides for the
 26 23 maximum protection of title insurance policyholders.
 26 24    2.  Security and escrow funds held by or on behalf of a
 26 25 title insurer that is subject to an order of liquidation,
 26 26 dissolution, or insolvency shall not become general assets and
 26 27 shall be administered as secured claims as defined in section
 26 28 507C.2.
 26 29    3.  Title insurance policies that are in force at the time
 26 30 an order of liquidation is entered shall not be cancelled
 26 31 except upon a showing to the court of good cause by the
 26 32 receiver.  The determination of good cause shall be within the
 26 33 discretion of the court.  In making this determination, the
 26 34 court shall consider the unique aspects of title insurance and
 26 35 all other relevant circumstances.
 27  1    4.  The court may set appropriate dates when potential
 27  2 claimants must file their claims with the receiver.  The court
 27  3 may set different dates for filing claims based upon a title
 27  4 insurance policy than for filing all other claims.  In setting
 27  5 dates, the court shall consider the unique aspects of title
 27  6 insurance and all other relevant circumstances.
 27  7    5.  As of the date of the order of insolvency or
 27  8 liquidation of a title insurer, all premiums paid, due, or to
 27  9 become due under policies of the title insurer, shall be
 27 10 considered fully earned.  It shall be the obligation of
 27 11 agents, insureds, or representatives of the title insurer to
 27 12 pay fully earned premiums to the receiver.
 27 13    Sec. 26.  NEW SECTION.  515I.12  RESTRICTIONS ON DIVIDENDS.
 27 14    A title insurer shall only declare or distribute a dividend
 27 15 to shareholders without the prior written approval of the
 27 16 commissioner, as permitted under section 515.44 for insurers
 27 17 other than life insurers.
 27 18    Sec. 27.  NEW SECTION.  515I.13  DIVERSIFICATION
 27 19 REQUIREMENTS.
 27 20    1.  Without the prior written approval of the commissioner,
 27 21 a domestic title insurer shall not accept the following:
 27 22    a.  Additional business from a title insurance agent that
 27 23 is not an affiliate of the title insurer if the business, when
 27 24 added to other business written through the title insurance
 27 25 agent during the same calendar year, provides that agent with
 27 26 aggregate premiums written on behalf of the title insurer that
 27 27 will exceed twenty percent of the title insurer's gross
 27 28 premiums written during the prior calendar year, as shown on
 27 29 the title insurer's most recent annual statement on file with
 27 30 the commissioner.
 27 31    b.  Additional direct operations business from a single
 27 32 source if, when added to other direct operations business from
 27 33 the single source during the same calendar year, provides
 27 34 aggregate premiums written on the direct operations business
 27 35 of the single source that will exceed twenty percent of the
 28  1 title insurer's gross premiums written during the prior
 28  2 calendar year as shown on the title insurer's most recent
 28  3 annual statement on file with the commissioner.  For purposes
 28  4 of this section, a "single source" means a person that refers
 28  5 business to a title insurer and any other person that
 28  6 controls, is controlled by, or is under common control with
 28  7 that person.
 28  8    2.  In determining whether to grant approval under
 28  9 subsection 1, the commissioner shall consider the following:
 28 10    a.  The potential that the acceptance of more business from
 28 11 a title insurance agent or a single source may adversely
 28 12 affect the financial solidity of the title insurer.
 28 13    b.  The availability of competing title insurance agents or
 28 14 additional sources in the territories in which the title
 28 15 insurer accepts risks.
 28 16    c.  The number of years the title insurer has been in
 28 17 business.
 28 18    d.  Reinsurance arrangements mitigating the concentration
 28 19 of business from the title insurance agent or single source.
 28 20    e.  The comparative profitability of the book of business
 28 21 of a title insurance agent or single source.
 28 22    f.  The degree of oversight of the operation of the title
 28 23 insurance agent or single source that is exercised by the
 28 24 title insurer.
 28 25    g.  Any other circumstances deemed appropriate by the
 28 26 commissioner.
 28 27    Sec. 28.  NEW SECTION.  515I.14  DIRECT OPERATIONS –
 28 28 POLICYHOLDER TREATMENT.
 28 29    1.  A title insurance report that includes an offer to
 28 30 issue an owner's title insurance policy covering the resale of
 28 31 owner-occupied residential property shall be furnished to the
 28 32 purchaser-mortgagor or to the purchaser-mortgagor's
 28 33 representative as soon as is reasonably possible prior to
 28 34 closing.  If the report cannot be delivered prior to the day
 28 35 of closing, the title insurer shall document the reasons for
 29  1 the delay.  The report furnished to the purchaser-mortgagor
 29  2 shall incorporate the following statement on the first page in
 29  3 bold type:
 29  4    Please read the exceptions and the terms shown or referred
 29  5 to herein carefully.  The exceptions are meant to provide you
 29  6 with notice of matters which are not covered under the terms
 29  7 of the title insurance policy and should be carefully
 29  8 considered.
 29  9    It is important to note that this form is not a written
 29 10 representation as to the condition of title and may not list
 29 11 all liens, defects, and encumbrances affecting title to the
 29 12 land.
 29 13    2.  A title insurer issuing a lender's title insurance
 29 14 policy to a mortgage-lender in conjunction with a mortgage
 29 15 loan made simultaneously with the purchase of all or part of
 29 16 the real estate securing the loan, where no owner's title
 29 17 insurance policy has been requested, shall give written
 29 18 notice, on a form prescribed or approved by the commissioner,
 29 19 to the purchaser-mortgagor or to the purchaser-mortgagor's
 29 20 representative that a lender's title insurance policy is being
 29 21 issued, as soon as is reasonably possible prior to closing.
 29 22 The notice shall explain that a lender's title insurance
 29 23 policy will be issued that protects the mortgage-lender, and
 29 24 that the policy does not provide title insurance protection to
 29 25 the purchaser-mortgagor who is the owner of the property being
 29 26 purchased.  The notice shall explain what a title insurance
 29 27 policy insures against and what possible exposures exist for
 29 28 the purchaser-mortgagor that can be insured against through
 29 29 the purchase of an owner's title insurance policy.  The notice
 29 30 shall also explain that the purchaser-mortgagor may obtain an
 29 31 owner's title insurance policy protecting the property owner
 29 32 at a specified cost or approximate cost, if the proposed
 29 33 coverage or amount of insurance is not then known.  A copy of
 29 34 the notice signed by the purchaser-mortgagor shall be retained
 29 35 in the underwriting file of the title insurer issuing the
 30  1 lender's title insurance policy for at least five years after
 30  2 the effective date of the policy.
 30  3    Sec. 29.  NEW SECTION.  515I.15  DUTIES OF TITLE INSURERS
 30  4 UTILIZING THE SERVICES OF TITLE INSURANCE AGENTS.
 30  5    1.  A title insurer shall not accept business from a title
 30  6 insurance agent unless there is a written contract between the
 30  7 title insurer and the title insurance agent that sets forth
 30  8 the responsibilities of each party and, where the title
 30  9 insurer and the title insurance agent share responsibility for
 30 10 a particular function, specifies the division of
 30 11 responsibilities between them.
 30 12    2.  A title insurer shall, at least annually, conduct an
 30 13 on-site review of the underwriting, claims, and escrow
 30 14 practices of title insurance agents under contract with the
 30 15 title insurer which shall include a review of the title
 30 16 insurance agent's policy blank inventory and processing
 30 17 operations.  If a title insurance agent does not maintain
 30 18 separate bank or trust accounts for each title insurer it
 30 19 represents, the title insurer shall verify that the funds held
 30 20 on its behalf are reasonably identifiable from the books of
 30 21 account and records of the title insurance agent.
 30 22    3.  A title insurer shall provide written notification of
 30 23 the appointment or termination and the reasons for termination
 30 24 of a title insurance agent to the commissioner within thirty
 30 25 days of executing a contract or terminating a contract with a
 30 26 title insurance agent.  Notices of the appointment or
 30 27 termination of a title insurance agent shall be made on forms
 30 28 prescribed or approved by the commissioner.
 30 29    4.  A title insurer shall not appoint to its board of
 30 30 directors an officer, director, employee, or controlling
 30 31 shareholder of a title insurance agent who wrote one percent
 30 32 or more of the title insurer's direct premiums written during
 30 33 the previous calendar year as shown on the title insurer's
 30 34 most recent annual statement on file with the commissioner.
 30 35    5.  A title insurer shall maintain an inventory of all
 31  1 policy forms or policy numbers allocated to each title
 31  2 insurance agent.
 31  3    6.  A title insurer shall have on file proof that each
 31  4 title insurance agent under contract with the title insurer is
 31  5 licensed by this state.
 31  6    7.  A title insurer shall establish underwriting guidelines
 31  7 and, where applicable, limitations on title insurance claims
 31  8 settlement authority to be incorporated into contracts with
 31  9 its title insurance agents.
 31 10    Sec. 30.  NEW SECTION.  515I.16  CONDITIONS FOR MAINTAINING
 31 11 ESCROW AND SECURITY DEPOSIT ACCOUNTS.
 31 12    A title insurer may operate as an escrow, security,
 31 13 settlement, or closing agent, provided all of the following
 31 14 apply:
 31 15    1.  All funds deposited with the title insurer in
 31 16 connection with an escrow, settlement, closing, or security
 31 17 deposit shall be submitted for collection to or deposited in a
 31 18 separate fiduciary trust account or accounts in a qualified
 31 19 financial institution no later than the close of the next
 31 20 business day after receipt of the funds, in accordance with
 31 21 all of the following requirements:
 31 22    a.  The funds shall be the property of the person or
 31 23 persons entitled to them under the provisions of the escrow,
 31 24 settlement, security deposit, or closing agreement, and shall
 31 25 be segregated for each depository by designating escrow,
 31 26 settlement, security deposit, or closing funds in the records
 31 27 of the title insurer in a manner that permits the funds to be
 31 28 identified on an individual basis.
 31 29    b.  The funds shall be applied only in accordance with the
 31 30 terms of the individual instructions or agreements under which
 31 31 the funds were accepted.
 31 32    2.  Funds held in an escrow account shall be disbursed only
 31 33 pursuant to a written instruction or agreement specifying how
 31 34 and to whom such funds may be disbursed.
 31 35    3.  Funds held in a security deposit account shall be
 32  1 disbursed only pursuant to a written agreement specifying all
 32  2 of the following:
 32  3    a.  What actions the indemnitor shall take to satisfy the
 32  4 indemnitor's obligation under the agreement.
 32  5    b.  The duties of the title insurer with respect to
 32  6 disbursements of the funds held, including a requirement to
 32  7 maintain evidence of the disposition of a title exception
 32  8 before any balance may be paid over to the depositing party or
 32  9 the depositing party's designee.
 32 10    c.  Any other provisions the commissioner may require.
 32 11    4.  A disbursement may be made out of an escrow,
 32 12 settlement, or closing account only if deposits in amounts at
 32 13 least equal to the disbursement have first been made directly
 32 14 to the account against which the disbursement will be made,
 32 15 and if the deposits are in one of the following forms:
 32 16    a.  Cash.
 32 17    b.  Wire transfers such that the funds are unconditionally
 32 18 received by the title insurer or the title insurer's
 32 19 depository.
 32 20    c.  Cashier's checks, certified checks, bank money orders,
 32 21 and teller's checks issued by a federally insured financial
 32 22 institution and unconditionally held by the title insurer.
 32 23    d.  United States treasury checks, federal reserve bank
 32 24 checks, federal home loan bank checks, and state of Iowa
 32 25 warrants.
 32 26    e.  Personal checks up to one thousand dollars.
 32 27    For the purposes of this subsection, "federally insured
 32 28 financial institution" means an institution in which monetary
 32 29 deposits are insured by the federal deposit insurance
 32 30 corporation or national credit union administration.
 32 31    5.  If the title insurance agent is appointed by two or
 32 32 more title insurers and maintains fiduciary trust accounts in
 32 33 connection with providing escrow or closing settlement
 32 34 services, the title insurance agent shall allow each title
 32 35 insurer reasonable access to the accounts and all supporting
 33  1 account information in order to ascertain the safety and
 33  2 security of the funds held by the title insurance agent.
 33  3    6.  This chapter does not prohibit the recording of
 33  4 documents prior to the time funds are available for
 33  5 disbursement with respect to any transaction involving real
 33  6 property.
 33  7    7.  This section is not intended to amend, alter, or
 33  8 supersede other sections of this chapter, or the laws of this
 33  9 state or the United States, regarding an escrow holder's
 33 10 duties and obligations.
 33 11    Sec. 31.  NEW SECTION.  515I.18  FAVORED AGENT OF TITLE
 33 12 INSURER.
 33 13    A title insurer shall not participate in any transaction in
 33 14 which a producer or other person, requires, directly or
 33 15 indirectly, or through a trustee, director, officer, agent,
 33 16 employee or affiliate, as a condition, agreement, or
 33 17 understanding to providing, selling, or furnishing any other
 33 18 person a loan, loan extension, credit, sale, property,
 33 19 contract, lease, or service, that the other person must place
 33 20 a title insurance policy of any kind with the title insurer or
 33 21 through a particular title insurance agent.
 33 22    Sec. 32.  NEW SECTION.  515I.19  PREMIUM RATE FILINGS AND
 33 23 STANDARDS.
 33 24    1.  A title insurer shall not charge any rates regulated by
 33 25 the state after the effective date of this Act, except in
 33 26 accordance with a premium rate schedule and manual filed with
 33 27 and approved by the commissioner in accordance with applicable
 33 28 statutes and regulations governing rate filings.  The
 33 29 commissioner may provide by regulation for interim use of
 33 30 premium rate schedules in effect prior to the effective date
 33 31 of this chapter.
 33 32    2.  The commissioner may establish rules, including rules
 33 33 providing statistical plans, for use by all title insurers and
 33 34 title insurance agents in the recording and reporting of
 33 35 revenue, loss, and expense experience in such form and detail
 34  1 as is necessary to aid the title insurer or title insurance
 34  2 agent in the establishment of rates and fees.
 34  3    3.  The commissioner may require that information provided
 34  4 under this section be verified by the president, vice
 34  5 president, secretary, or actuary of the title insurer or title
 34  6 insurance agent.  The commissioner may further require that
 34  7 the information provided by a title insurer or title insurance
 34  8 agent under this section be subject to an audit conducted by
 34  9 an independent certified public accountant.  The commissioner
 34 10 may establish a minimum threshold level at which an audit is
 34 11 required.
 34 12    4.  Information filed with the commissioner relating to the
 34 13 revenue, loss, and expense experience of a particular title
 34 14 insurance agent shall be kept confidential unless the
 34 15 commissioner determines that it is in the public interest to
 34 16 disclose the information.
 34 17    Sec. 33.  NEW SECTION.  515I.20  FORMS APPROVAL.
 34 18    1.  A title insurer or authorized rate service organization
 34 19 shall not deliver or issue for delivery or permit any of its
 34 20 authorized title insurance agents to deliver in this state,
 34 21 any form, in connection with title insurance written, unless
 34 22 the form has first been filed with and approved by the
 34 23 commissioner or unless thirty days have elapsed since the form
 34 24 was filed and the form has not been disapproved by the
 34 25 commissioner as misleading or violative of public policy.
 34 26    2.  Forms subject to approval by the commission pursuant to
 34 27 this section shall include the following:
 34 28    a.  Title insurance policies, including standard form
 34 29 endorsements.
 34 30    b.  Title insurance reports issued prior to the issuance of
 34 31 a title insurance policy.
 34 32    3.  After giving notice and the opportunity to be heard to
 34 33 the title insurer or rate service organization which submitted
 34 34 the form for approval, the commissioner may withdraw approval
 34 35 of a form upon making a determination that use of the form is
 35  1 contrary to the legal requirements applicable at the time of
 35  2 the withdrawal of approval.  The effective date of the
 35  3 withdrawal of approval of a form by the commissioner shall be
 35  4 not less than ninety days after notice of the proposed
 35  5 withdrawal of approval is given.
 35  6    4.  An approved policy form or endorsement providing
 35  7 coverage for which no identifiable premium is assessed shall
 35  8 be incorporated into every applicable title insurance policy.
 35  9 The title insurer shall disclose any additional coverage to
 35 10 the insured.  The provisions of this section shall not operate
 35 11 to eliminate any underwriting standard or conditions relating
 35 12 to the approved policy forms or endorsements.
 35 13    5.  A term or condition related to insurance coverage
 35 14 provided by an approved title insurance policy or an exception
 35 15 to the coverage, except those ascertained from a search and
 35 16 examination of records relating to a title or inspection or
 35 17 survey of a property to be insured, shall not be included in a
 35 18 title insurance policy until the term, condition, or exception
 35 19 has been filed with and approved by the commissioner.
 35 20    Sec. 34.  NEW SECTION.  515I.21  FILING BY RATING BUREAUS.
 35 21    1.  A title insurer or title insurance agent may satisfy
 35 22 its obligation to file premium rates, rating manuals, and
 35 23 forms as required by this chapter by becoming a member of, or
 35 24 a subscriber to, a rate service organization, organized and
 35 25 licensed under the provisions of this code, that makes the
 35 26 required filings on behalf of the title insurer or title
 35 27 insurance agent, and by authorizing the commissioner in
 35 28 writing to accept the filings made on behalf of the title
 35 29 insurer or title insurance agent.
 35 30    2.  This chapter shall not be construed to require a title
 35 31 insurer or title insurance agent to become a member of, or a
 35 32 subscriber to, a rate service organization.  This chapter
 35 33 shall not be construed to prohibit a member or subscriber of a
 35 34 rate service organization from filing deviations from rate
 35 35 service organization filings.
 36  1    Sec. 35.  NEW SECTION.  515I.22  RECORD RETENTION
 36  2 REQUIREMENTS.
 36  3    A title insurer shall retain and preserve evidence of title
 36  4 examinations and determinations of insurability for business
 36  5 written, and records relating to escrow and security deposits
 36  6 for as long as is appropriate under the circumstances but in
 36  7 no event less than three years after the title insurance
 36  8 policy is issued or three years after the escrow or security
 36  9 deposit account is closed.  This section shall not apply to a
 36 10 title insurer acting as a coinsurer if one of the other
 36 11 coinsurers has complied with this section.
 36 12    Sec. 36.  NEW SECTION.  515I.23  RULES AND REGULATIONS.
 36 13    The commissioner may adopt rules pursuant to chapter 17A
 36 14 and issue regulations and orders as may be necessary for the
 36 15 effective administration of this chapter.
 36 16    Sec. 37.  NEW SECTION.  515I.24  PENALTIES AND LIABILITIES.
 36 17    1.  If the commissioner determines that a title insurer or
 36 18 any other person has violated this chapter, or any rule
 36 19 adopted pursuant to this chapter, or any regulation or order
 36 20 issued under this chapter, after notice and opportunity to be
 36 21 heard, the commissioner may order the following:
 36 22    a.  A penalty not exceeding one hundred dollars for each
 36 23 violation.
 36 24    b.  Revocation or suspension of the title insurer's
 36 25 license.
 36 26    2.  This section shall not affect the right of the
 36 27 commissioner to impose any other penalties provided for in the
 36 28 insurance code.
 36 29    3.  This chapter is not intended to and shall not in any
 36 30 manner limit or restrict the rights of policyholders,
 36 31 claimants, and creditors.
 36 32    Sec. 38.  NEW SECTION.  515I.25  VIOLATIONS OF THE REAL
 36 33 ESTATE SETTLEMENT PROCEDURES ACT.
 36 34    The commissioner or attorney general may bring an action in
 36 35 a court of competent jursidiction to enjoin violations of the
 37  1 federal Real Estate Settlement Procedures Act, 12 U.S.C. }
 37  2 2607, et seq.
 37  3    Sec. 39.  Section 22.7, Code 2003, is amended by adding the
 37  4 following new subsection:
 37  5    NEW SUBSECTION.  47.  Information filed with the
 37  6 commissioner of insurance pursuant to section 515I.19 relating
 37  7 to the revenue, loss, and expense experience of a particular
 37  8 title insurance agent except if the commissioner of insurance
 37  9 determines that disclosure of the information is in the public
 37 10 interest.
 37 11    Sec. 40.  Section 515.48, subsection 10, Code 2003, is
 37 12 amended to read as follows:
 37 13    10.  Insure any additional risk not specifically included
 37 14 within any of the foregoing classes, which is a proper subject
 37 15 for insurance, is not prohibited by law or contrary to sound
 37 16 public policy, and which, after public notice and hearing, is
 37 17 specifically approved by the commissioner of insurance, except
 37 18 title insurance or insurance against loss or damage by reason
 37 19 of defective title, encumbrances or otherwise.  When such
 37 20 additional kind of insurance is approved by the commissioner,
 37 21 the commissioner shall designate within which classification
 37 22 of risks provided for in section 515.49 it shall fall.
 37 23    Sec. 41.  Section 535.8, subsection 2, paragraph b,
 37 24 subparagraph 10, Code 2003, is amended to read as follows:
 37 25    (10)  The cost of a title guaranty issued by the Iowa
 37 26 finance authority pursuant to chapter 16 or the cost of title
 37 27 insurance.
 37 28    The lender shall not charge the borrower for the cost of
 37 29 revenue stamps or real estate commissions which are paid by
 37 30 the seller.  Collection of any cost other than as expressly
 37 31 permitted by this lettered paragraph is prohibited.
 37 32    Sec. 42.  EFFECTIVE AND APPLICABILITY DATES.  This Act,
 37 33 being deemed of immediate importance, takes effect upon
 37 34 enactment and applies to all transactions entered into on or
 37 35 after the effective date, except for the following:
 38  1    1.  If the paid-up capital and surplus requirements for a
 38  2 title insurer prior to the effective date of this Act are less
 38  3 than the paid-up capital and surplus requirements of chapter
 38  4 515I, a title insurer shall have two years after the effective
 38  5 date of this Act to comply with those requirements.
 38  6    2.  Section 515I.10, as enacted in this Act, provides for a
 38  7 multiyear compliance period during which requisite reserves
 38  8 must be established.  
 38  9                           EXPLANATION
 38 10    This bill authorizes the sale of title insurance in this
 38 11 state and regulates title insurance agents and title insurers.
 38 12    The bill creates a new Code chapter 515H in the insurance
 38 13 code entitled the "Iowa Title Insurance Agents Act".  The bill
 38 14 provides for the licensing, regulation, and supervision of the
 38 15 sale by agents of title insurance in Iowa.  The bill sets
 38 16 forth the requirements for contracts between title insurers
 38 17 and title insurance agents, conditions for providing escrow,
 38 18 closing, or settlement services, record and reporting
 38 19 requirements, and provides penalties for violations of this
 38 20 Code chapter or any related regulation or order.
 38 21    The bill also creates a new Code chapter 515I in the
 38 22 insurance code entitled the "Iowa Title Insurers Act".  The
 38 23 bill provides for the regulation and supervision of title
 38 24 insurance and insurers licensed to write title insurance in
 38 25 the state by the commissioner of insurance.
 38 26    The bill sets forth the authorized activities of title
 38 27 insurers and limitation of powers and specifies the paid-up
 38 28 capital and surplus, admitted asset standards, and reserve
 38 29 requirements for a title insurer.  The bill also sets forth
 38 30 procedures for liquidation, dissolution, or insolvency of a
 38 31 title insurer.
 38 32    The bill sets forth diversification requirements, standards
 38 33 for policyholder treatment, duties for utilizing title
 38 34 insurance agents by title insurers, conditions for maintaining
 38 35 escrow and security deposit accounts, prohibitions relating to
 39  1 referrals or favored agents of a title insurer, premium rate
 39  2 filing standards, and requirements for the approval of forms
 39  3 used by title insurers.
 39  4    The bill provides for the satisfaction of some obligations
 39  5 of a title insurer by membership or subscription in a rate
 39  6 service organization.  The bill also sets forth record
 39  7 retention requirements and provides penalties and liabilities
 39  8 for violations of this Code chapter or any related regulation
 39  9 or order.
 39 10    The bill amends Code section 515.48 to permit the sale of
 39 11 title insurance or insurance against loss or damage by reason
 39 12 of defective title, encumbrances, or otherwise.
 39 13    The bill also amends Code section 535.8 to allow a lender
 39 14 to collect the cost of title insurance which is incurred by
 39 15 the lender in connection with a residential real estate loan
 39 16 if the cost of the title insurance is disclosed to the
 39 17 borrower.
 39 18    The bill takes effect upon enactment and applies to all
 39 19 transactions entered into on or after the effective date
 39 20 except that if the paid-up capital and surplus requirements
 39 21 for a title insurer prior to the effective date are less than
 39 22 the requirements of new Code chapter 515I, a title insurer has
 39 23 two years after the bill's effective date to comply with those
 39 24 requirements.  The bill also provides for a multiyear
 39 25 compliance period during which required reserves must be
 39 26 established.  
 39 27 LSB 1521SC 80
 39 28 av/pj/5
     

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