H.B. 466

This document includes House Committee Amendments incorporated into the bill on Fri, Feb 22, 2008 at 11:20 AM by ddonat. --> 1

TITLE INSURANCE RECOVERY,
2 EDUCATION, AND RESEARCH FUND ACT
3 2008 GENERAL SESSION
4 STATE OF UTAH
5 Chief Sponsor: Michael T. Morley
6 Senate Sponsor: Dan R. Eastman
7
8 LONG TITLE
9 General Description:
10 This bill modifies the Insurance Code to create the Title Insurance Recovery,
11 Education, and Research Fund and make related amendments.
12 Highlighted Provisions:
13 This bill:
14 . modifies requirements for title insurance producer reserve accounts;
15 . enacts the Title Insurance Recovery, Education, and Research Fund Act, including:
16 . defining terms;
17 . addressing disciplinary actions;
18 . creating the fund;
19 . providing for assessments;
20 . providing for how the fund may be used;
21 . providing procedures for making claims against the fund; and
22 . creating subrogation rights; and
23 . makes technical and conforming amendments.
24 Monies Appropriated in this Bill:
25 None
26 Other Special Clauses:
27 This bill takes effect on July 1, 2008.

28 Utah Code Sections Affected:
29 AMENDS:
30 31A-23a-204, as last amended by Laws of Utah 2007, Chapters 307 and 325
31 ENACTS:
32 31A-40-101, Utah Code Annotated 1953
33 31A-40-102, Utah Code Annotated 1953
34 31A-40-103, Utah Code Annotated 1953
35 31A-40-201, Utah Code Annotated 1953
36 31A-40-202, Utah Code Annotated 1953
37 31A-40-203, Utah Code Annotated 1953
38 31A-40-301, Utah Code Annotated 1953
39 31A-40-302, Utah Code Annotated 1953
40 31A-40-303, Utah Code Annotated 1953
41 31A-40-304, Utah Code Annotated 1953
42 31A-40-305, Utah Code Annotated 1953
43 31A-40-306, Utah Code Annotated 1953
44
45 Be it enacted by the Legislature of the state of Utah:
46 Section 1. Section 31A-23a-204 is amended to read:
47 31A-23a-204. Special requirements for title insurance producers and agencies.
48 [Title] A title insurance [producers] producer, including [agencies] an agency, shall be
49 licensed in accordance with this chapter, with the additional requirements listed in this section.
50 (1) (a) A person that receives a new license under this title on or after July 1, 2007 as a
51 title insurance agency, shall at the time of licensure be owned or managed by one or more
52 natural persons who are licensed with the following lines of authority for at least three of the
53 five years immediately proceeding the date on which the title insurance agency applies for a
54 license:
55 (i) both a:
56 (A) search line of authority; and
57 (B) escrow line of authority; or
58 (ii) a search and escrow line of authority.

59 (b) A title insurance agency subject to Subsection (1)(a) may comply with Subsection
60 (1)(a) by having the title insurance agency owned or managed by:
61 (i) one or more natural persons who are licensed with the search line of authority for
62 the time period provided in Subsection (1)(a); and
63 (ii) one or more natural persons who are licensed with the escrow line of authority for
64 the time period provided in Subsection (1)(a).
65 (c) The Title and Escrow Commission may by rule, subject to Section 31A-2-404 ,
66 exempt an attorney with real estate experience from the experience requirements in Subsection
67 (1)(a).
68 (2) (a) [Every] A title insurance agency or producer appointed by an insurer shall
69 maintain:
70 (i) a fidelity bond;
71 (ii) a professional liability insurance policy; or
72 (iii) a financial protection:
73 (A) equivalent to that described in Subsection (2)(a)(i) or (ii); and
74 (B) that the commissioner considers adequate.
75 (b) The bond, insurance, or financial protection required by this Subsection (2):
76 (i) shall be supplied under a contract approved by the commissioner to provide
77 protection against the improper performance of any service in conjunction with the issuance of
78 a contract or policy of title insurance; and
79 (ii) be in a face amount no less than $50,000.
80 (c) The Title and Escrow Commission may by rule, subject to Section 31A-2-404 ,
81 exempt title insurance producers from the requirements of this Subsection (2) upon a finding
82 that, and only so long as, the required policy or bond is generally unavailable at reasonable
83 rates.
84 (3) (a) [(i) Every] A title insurance agency or producer appointed by an insurer shall
85 maintain a reserve fund to the extent required by this Subsection (3).
86 [(ii) The reserve fund required by this Subsection (3) shall be:]
87 [(A) (I) composed of assets approved by the commissioner and the Title and Escrow
88 Commission;]
89 [(II) maintained as a separate trust account; and]

90 [(III) charged as a reserve liability of the title insurance producer in determining the
91 producer's financial condition; and]
92 [(B) accumulated by segregating 1% of all gross income on premiums received from
93 the title insurance business.]
94 [(iii) The reserve fund shall contain the accumulated assets for the immediately
95 preceding ten years as defined in Subsection (3)(a)(ii).]
96 [(iv) That] (b) On or after July 1, 2008, a title insurance agency or producer may not
97 deposit monies to a reserve fund required by this Subsection (3).
98 (c) On or after July 1, 2008, a title insurance agency or producer for the portion of the
99 assets held in the reserve fund over the preceding ten years may [be]:
100 [(A) withdrawn] (i) withdraw from the reserve fund[; and] in accordance with a time
101 schedule adopted by the title insurance agency or producer that allows:
102 (A) all the monies to be withdrawn in one year; or
103 (B) the monies to be withdrawn in equal partial withdrawals of principal over a time
104 period of two years, three years, four years, five years, or ten years; and
105 [(B) restored] (ii) restore the amounts withdrawn to the income of the title insurance
106 producer.
107 [(v)] (d) The title insurance producer may withdraw interest from the reserve fund
108 related to the principal amount as it accrues.
109 [(b)] (e) (i) A disbursement may not be made from the reserve fund except as provided
110 in Subsection (3)[(a)](c) unless the title insurance producer ceases doing business as a result of:
111 (A) a sale of assets;
112 (B) a merger of the producer with another producer;
113 (C) a termination of the producer's license;
114 (D) an insolvency; or
115 (E) any cessation of business by the producer.
116 (ii) [Any disbursements] A disbursement from the reserve fund may be made only to
117 settle [claims] a claim arising from the improper performance of the title insurance producer in
118 providing services defined in Section 31A-23a-406 .
119 (iii) The commissioner shall be notified ten days before any [disbursements]
120 disbursement from the reserve fund.

121 (iv) The notice required by this Subsection (3)[(b)](e) shall contain:
122 (A) the amount of claim;
123 (B) the nature of the claim; and
124 (C) the name of the payee.
125 [(c)] (f) (i) [The] Except as provided in Subsection (3)(c), the reserve fund shall be
126 maintained by the title insurance producer or the title insurance producer's representative for a
127 period of two years after the day on which the title insurance producer ceases doing business.
128 (ii) Any assets remaining in the reserve fund at the end of the two years specified in
129 Subsection (3)(c)(i) may be withdrawn and restored to the former title insurance producer.
130 (4) Any examination for licensure shall include questions regarding the search and
131 examination of title to real property.
132 (5) A title insurance producer may not perform the functions of escrow unless the title
133 insurance producer has been examined on the fiduciary duties and procedures involved in those
134 functions.
135 (6) The Title and Escrow Commission shall adopt rules, subject to Section 31A-2-404 ,
136 after consulting with the department and the department's test administrator, establishing an
137 examination for a license that will satisfy this section.
138 (7) A license may be issued to a title insurance producer who has qualified:
139 (a) to perform only searches and examinations of title as specified in Subsection (4);
140 (b) to handle only escrow arrangements as specified in Subsection (5); or
141 (c) to act as a title marketing representative.
142 (8) (a) A person licensed to practice law in Utah is exempt from the requirements of
143 Subsections (2) and (3) if that person issues 12 or less policies in any 12-month period.
144 (b) In determining the number of policies issued by a person licensed to practice law in
145 Utah for purposes of Subsection (8)(a), if the person licensed to practice law in Utah issues a
146 policy to more than one party to the same closing, the person is considered to have issued only
147 one policy.
148 (9) A person licensed to practice law in Utah, whether exempt under Subsection (8) or
149 not, shall maintain a trust account separate from a law firm trust account for all title and real
150 estate escrow transactions.
151 Section 2. Section 31A-40-101 is enacted to read:

152 CHAPTER 40. TITLE INSURANCE RECOVERY,
153 EDUCATION, AND RESEARCH FUND ACT
154 Part 1. General Provisions
155 31A-40-101. Title.
156 This chapter is known as the "Title Insurance Recovery, Education, and Research Fund
157 Act."
158 Section 3. Section 31A-40-102 is enacted to read:
159 31A-40-102. Definitions.
160 As used in this chapter:
161 (1) "Commission" means the Title and Escrow Commission created in Section
162 31A-2-403 .
163 (2) "Fund" means the Title Insurance Recovery, Education, and Research Fund created
164 in Section 31A-40-201 .
165 (3) "Title insurance licensee" means:
166 (a) a title insurance agency; or
167 (b) a title insurance producer.
168 Section 4. Section 31A-40-103 is enacted to read:
169 31A-40-103. Authority to take disciplinary action not limited.
170 (1) This chapter does not limit the authority of the commissioner or the commission to
171 take disciplinary action against a title insurance licensee for a violation of this title or rules
172 made by the department or commission under this title.
173 (2) The repayment in full of obligations to the fund by a title insurance licensee does
174 not nullify or modify the effect of another disciplinary proceeding brought pursuant to this title
175 or rules and regulations made by the department or commission under this title.
176 Section 5. Section 31A-40-201 is enacted to read:
177 Part 2. Creation of Fund
178 31A-40-201. Creation of Title Insurance Recovery, Education, and Research
179 Fund.
180 (1) There is created a restricted special revenue fund to be known as the "Title
181 Insurance Recovery, Education, and Research Fund."
182 (2) The fund shall consist of:

183 (a) assessments on title insurance producers made under this chapter;
184 (b) amounts collected under Section 31A-40-305 ; and
185 (c) interest earned on the fund.
186 (3) Interest on fund monies shall be deposited into the fund.
187 (4) The department shall administer the fund.
188 Section 6. Section 31A-40-202 is enacted to read:
189 31A-40-202. Assessments.
190 (1) Beginning January 1, 2009, a title insurance agency licensed under this title shall
191 pay an annual assessment determined by the commission by rule made in accordance with Title
192 63, Chapter 46a, Utah Administrative Rulemaking Act, except that the annual assessment:
193 (a) may not exceed $1,000; and
194 (b) shall be determined on the basis of title insurance premium volume.
195 (2) Beginning January 1, 2009, an individual who applies for a license or renewal of a
196 license as a title insurance producer, shall pay in addition to any other fee required by this title,
197 an assessment H. [ no ] not .H to exceed $20, as determined by the commission by rule made in
197a accordance
198 with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, except that if the individual
199 holds more than one license, the total of all assessments under this Subsection (2) may not
200 exceed $20 in a fiscal year.
201 H.[( 3) (a) Subject to Subsection (3)(b), a title insurance licensee licensed on July 1, 2008
202 shall pay to the department an assessment equal to the greater of:
203 (i) $1,000; or
204 (ii) 2% of the balance as of July 1, 2008 in the title insurance licensee's reserve account
205 required under Subsection 31A-23a-204 (3).
206 (b) If the aggregate amount collected from title insurance licensees under Subsection
207 (3)(a) exceeds $250,000, the commission may reduce the assessment by an equal percentage
208 for all title insurance licensees required to pay the assessment under Subsection (3)(a).
209 (c) A title insurance licensee required to pay an assessment under Subsection (3)(a)
210 shall pay the assessment to the department by no later than August 1, 2008. ]
210a (3)(a) To be licensed as
210b a title insurance agency on or after July 1, 2008, a person shall pay to the department an
210c assessment of $1,000 before the day on which the person is licensed as a title insurance agency.
210d (b)(i) By no later than July 15, 2008, the department shall assess on a title insurance
210e agency
210f licensed as of June 30, 2008, an amount equal to the greater of:
210g (A) $1,000; or
210h (B) subject to Subsection (3)(b)(ii), 2% of the balance as of December 31, 2007, in the

210i title insurance agency's reserve account required under Subsection 31A-23a-204(3).
210j (ii) The department may assess on a title insurance agency an amount less than
210k 2% of the
210l balance described in Subsection (3)(b)(i)(B) if:
210m (A) before issuing the assessments under this
210n Subsection (3)(b) the department determines that the total of all assessments under Subsection
210o (3)(b)(i) will exceed $250,000;
210p (B) the amount assessed on the title insurance agency is not less than $1,000; and
210q (C) the department reduces the assessment in a proportionate amount for title
210r insurance
210s agencies assessed on the basis of the 2% of the balance described in Subsection (3)(b)(i)(B).
210t (iii) A title insurance agency assessed under this Subsection (3)(b) shall pay the
210u assessment by
210v no later than August 1, 2008. .H
211 (4) The department may not assess a title insurance licensee an assessment for
212 purposes of the fund if that assessment is not expressly provided for in this section.
213 Section 7. Section 31A-40-203 is enacted to read:

214 31A-40-203. Use of monies.
215 (1) Monies in the fund may be used to pay claims made under Part 3, Claims on Fund.
216 (2) (a) Except as limited by Subsection (2)(b), monies in the fund in excess of
217 $250,000 may be used by the commissioner, with the consent of the commission, to:
218 (i) investigate violations of this chapter related to fraud by a title insurance licensee;
219 (ii) conduct education and research in the field of title insurance; or
220 (iii) H. [ audit or review ] examine .H a title insurance licensee's:
221 (A) escrow and trust account;
222 H. [ (B) financial condition;
223 (C) ] (B) .H search and examine procedures; or
224 H. [ (D) ] (C) .H compliance with applicable statutes and rules.
225 (b) The commissioner may not use more than 75% of monies collected under this
226 chapter in a fiscal year from assessments and interest for the purposes outlined in this
227 Subsection (2).
228 (3) H. [ An audit ] The disclosure of an examination .H conducted under this section is
228a H. [ confidential ] governed by Section 31A-2-204 .H .
229 Section 8. Section 31A-40-301 is enacted to read:
230 Part 3. Claims on Fund
231 31A-40-301. Procedure for making a claim against the fund.
232 (1) (a) To bring a claim against the fund a person shall notify the department within 30
233 business days of the day on which the person files an action against a title insurance licensee
234 alleging the following related to a title insurance transaction:
235 (i) fraud;
236 (ii) misrepresentation; or
237 (iii) deceit.
238 (b) The notification required by Subsection (1) shall be:
239 (i) in writing; and
240 (ii) signed by the person who provides the notice.
241 (c) Within 30 days of the day on which the department receives a notice under
242 Subsection (1)(a), the department may intervene in the action described in Subsection (1)(a).
243 (2) (a) Subject to the other provisions in this section, a person who provides the notice
244 required under Subsection (1) may maintain a claim against the fund if:

245 (i) in an action described in Subsection (1), the person obtains a final judgment in a
246 court of competent jurisdiction in this state against a title insurance licensee;
247 (ii) all proceedings including appeals related to the final judgment described in
248 Subsection (2)(a)(i) are at an end; and
249 (iii) the person files a verified petition in the court where the judgment is entered for an
250 order directing payment from the fund for the uncollected actual damages included in the
251 judgment and unpaid.
252 (b) A court may not direct the payment from the fund of:
253 (i) punitive damages;
254 (ii) attorney fees;
255 (iii) interest; or
256 (iv) court costs.
257 (c) Regardless of the number of claimants or parcels of real estate involved in a single
258 real estate transaction, the liability of the fund may not exceed:
259 (i) $15,000 for a single real estate transaction; or
260 (ii) $50,000 for all transactions of a title insurance license.
261 (d) A person shall:
262 (i) serve the verified petition required by Subsection (2)(a) on the department; and
263 (ii) file an affidavit of service with the court.
264 (3) (a) A court shall conduct a hearing on a petition filed with the court within 30 days
265 after the day on which the department is served.
266 (b) The person who files the petition may recover from the fund only if the person
267 shows all of the following:
268 (i) the person is not a spouse of the judgment debtor or the personal representative of
269 the spouse;
270 (ii) the person complied with this chapter;
271 (iii) the person has obtained a final judgment in accordance with this section indicating
272 the amount of the judgment awarded;
273 (iv) the amount still owing on the judgment at the date of the petition;
274 (v) (A) the person has had a writ of execution issued under the judgment, and the
275 officer executing the writ has returned showing that no property subject to execution in

276 satisfaction of the judgment could be found; or
277 (B) that the amount realized upon the execution levied against the property of the
278 judgment debtor is insufficient to satisfy the judgement;
279 (vi) the person has made reasonable searches and inquiries to ascertain whether the
280 judgment debtor has any interest in property, real or personal, that may satisfy the judgment;
281 and
282 (vii) the person has exercised reasonable diligence to secure payment of the judgment
283 from the assets of the judgment debtor.
284 (4) If the person described in Subsection (3) satisfies the court that it is not practicable
285 for the person to comply with one or more of the requirements in Subsections (3)(b)(v) through
286 (vii), the court may waive those requirements.
287 (5) (a) A judgment that is the basis for a claim against the fund may not have been
288 discharged in bankruptcy.
289 (b) If a bankruptcy proceeding is still open or is commenced during the pendency of the
290 claim, the person bringing a claim against the fund shall obtain an order from the bankruptcy
291 court declaring the judgement and debt to be nondischargeable.
292 Section 9. Section 31A-40-302 is enacted to read:
293 31A-40-302. Department's authority to act upon receipt of petition.
294 (1) Upon receipt of a petition required by Section 31A-40-301 , the department may
295 answer, initiate review proceedings of its own, or appear in any proceeding:
296 (a) in the name of the defendant to the action; or
297 (b) on behalf of the fund.
298 (2) Subject to court approval, the department may compromise a claim on the basis of
299 an application of the person who files the petition.
300 Section 10. Section 31A-40-303 is enacted to read:
301 31A-40-303. Court determination and order.
302 Subject to the requirements of this part, if the court determines that a claim should be
303 levied against the fund, the court shall enter an order directing the department to pay from the
304 fund that portion of the petitioner's judgment that is payable from the fund.
305 Section 11. Section 31A-40-304 is enacted to read:
306 31A-40-304. Insufficient funds to satisfy judgment.

307 If the monies in the fund are insufficient to satisfy a claim ordered to be paid under
308 Section 31A-40-303 , when sufficient money is in the fund, the department shall pay a person
309 with an unpaid claim:
310 (1) in the order that petitions related to unpaid claims are originally served on the
311 department; and
312 (2) an amount equal to the sum of:
313 (a) the unpaid claim; and
314 (b) interest on the unpaid claim at a rate of 5% per annum from the date the court
315 orders payment from the fund until the day on which the claim is paid.
316 Section 12. Section 31A-40-305 is enacted to read:
317 31A-40-305. Department subrogated -- Authority to revoke license.
318 (1) (a) If the department makes payment from the fund, the department is subrogated to
319 all the rights of the person who received monies from the fund for the amounts paid out of the
320 fund.
321 (b) Any amounts recovered by the department under the subrogated rights shall be
322 deposited in the fund.
323 (2) (a) The license of a title insurance licensee for whom payment from the fund is
324 made under this chapter is automatically revoked.
325 (b) Before a title insurance licensee whose license is revoked under this section may
326 apply for a new license under this title, the title insurance licensee shall pay to the department
327 for deposit in the fund:
328 (i) the amounts paid by the fund because of an action brought against the title insurance
329 licensee; and
330 (ii) interest at a rate determined by the commissioner with the concurrence of the
331 commission.
332 Section 13. Section 31A-40-306 is enacted to read:
333 31A-40-306. Failure to comply constitutes a waiver.
334 The failure of a person to comply with this chapter constitutes a waiver of any right
335 provided under this chapter.
336 Section 14. Effective date.
337 This bill takes effect on July 1, 2008.

Legislative Review Note
as of 2-8-08 7:01 PM

Office of Legislative Research and General Counsel