Public Act 096-1454
 
HB5409 EnrolledLRB096 18556 RPM 33938 b


  
    AN ACT concerning insurance.
  
 
    Be it enacted by the People of the State of Illinois,
 
represented in the General Assembly:
  




 
 
    Section 5. The Title Insurance Act is amended  by changing 
Sections 3 and 16 and by adding Section 16.1 as follows:
 



    (215 ILCS 155/3)  (from Ch. 73, par. 1403)


    Sec. 3. As used in this Act, the words and phrases 
following shall
have the following meanings unless the context 
requires otherwise:

    (1) "Title insurance business" or "business of title 
insurance" means:


        (A) Issuing as insurer or offering to issue as insurer 
    title insurance;
and


        (B) Transacting or proposing to transact one or more of 
    the following
activities when
conducted or performed in 
    contemplation of or in conjunction with the issuance
of 
    title insurance;


            (i) soliciting or negotiating the issuance of 
        title insurance;


            (ii) guaranteeing, warranting, or otherwise 
        insuring the correctness of
title
searches for all 
        instruments affecting titles to real property, any 
        interest in
real property, cooperative units and 
        proprietary leases, and for all liens or
charges 
        affecting the same;


            (iii) handling of escrows, settlements, or 
        closings;


            (iv) executing title insurance policies;


            (v) effecting contracts of reinsurance;


            (vi) abstracting, searching, or examining titles; 
        or


            (vii) issuing insured closing letters or closing 
        protection letters;


        (C) Guaranteeing, warranting, or insuring searches or 
    examinations of
title to real property or any interest in 
    real property, with the exception of
preparing an 
    attorney's opinion of title; or


        (D) Guaranteeing or warranting the status of title as 
    to ownership of or
liens on real property and personal 
    property by any person other than the
principals to the 
    transaction; or


        (E) Doing or proposing to do any business substantially 
    equivalent to any
of the activities listed in this 
    subsection,
provided that the preparation of an attorney's 
    opinion
of title pursuant to paragraph (1)(C) is not 
    intended to be within the
definition of "title insurance 
    business" or "business of title insurance".

    (1.5) "Title insurance" means insuring, guaranteeing, 
warranting, or
indemnifying owners of real or personal property 
or the holders of liens or
encumbrances thereon or others 
interested therein against loss or damage
suffered by reason of 
liens, encumbrances upon, defects in, or the
unmarketability of 
the title to the property; the invalidity or
unenforceability 
of any liens or encumbrances thereon; or doing any business in

substance equivalent to any of the foregoing.
"Warranting" for 
purpose of this provision shall not
include any warranty 
contained in instruments of encumbrance or conveyance.
Title 
insurance is a single line form of insurance, also known as 
monoline. An attorney's opinion of title pursuant to paragraph 
(1)(C) is not intended to
be within the definition of "title 
insurance".

    (2) "Title insurance company" means any domestic company 
organized under
the laws of this State for the purpose of 
conducting the business of
title insurance and any title 
insurance
company organized under the laws of another State, 
the District of Columbia
or foreign government and authorized 
to transact the business of
title insurance in this State.

    (3) "Title insurance agent" means a person, firm, 
partnership,
association, corporation or other legal entity 
registered by a title
insurance company and authorized by such 
company to determine insurability
of title in accordance with 
generally acceptable underwriting rules and
standards in 
reliance on either the public records or a search package

prepared from a title plant, or both, and authorized by such 
title insurance company in addition to do any
of the following:  
act as an escrow agent pursuant to subsections (f), (g), and 
(h) of Section 16 of this Act, solicit title insurance, collect

premiums, or issue title insurance commitments reports, 
binders or commitments to insure and
policies, and endorsements 
of the title insurance company; in its behalf, provided, 
however, the term "title insurance agent"
shall not include 
officers and salaried employees of any title insurance
company.

    (4) "Producer of title business" is any person, firm, 
partnership,
association, corporation or other legal entity 
engaged in this State in the
trade, business, occupation or 
profession of (i) buying or selling
interests in real property, 
(ii) making loans secured by interests in real
property, or 
(iii) acting as broker, agent, attorney, or representative of

natural persons or other legal entities that buy or sell 
interests in real
property or that lend money with such 
interests as security.

    (5) "Associate" is any firm, association, partnership, 
corporation or
other legal entity organized for profit in which 
a producer of title
business is a director, officer, or partner 
thereof, or owner of a
financial interest, as defined herein, 
in such entity; any legal entity
that controls, is controlled 
by, or is under common control with a producer
of title 
business; and any natural person or legal entity with whom a

producer of title business has any agreement, arrangement, or 
understanding
or pursues any course of conduct the purpose of 
which is to evade the
provisions of this Act.

    (6) "Financial interest" is any ownership interest, legal 
or beneficial,
except ownership of publicly traded stock.

    (7) "Refer" means to place or cause to be placed, or to 
exercise any
power or influence over the placing of title 
business, whether or not the
consent or approval of any other 
person is sought or obtained with respect
to the referral.

    (8) "Escrow Agent" means any title insurance company or any 
title
insurance agent, including independent contractors of 
either, acting on behalf of a title insurance company, which

receives deposits, in trust, of funds or documents, or both, 
for the purpose
of effecting the sale, transfer, encumbrance or 
lease of real property to
be held by such escrow agent until 
title to the real property that is the
subject of the escrow is 
in a prescribed condition. An escrow agent conducting closings 
shall be subject to the provisions of paragraphs (1) through 
(4) of subsection (e) of Section 16 of this Act.


    (9) "Independent Escrowee" means any firm, person, 
partnership,
association, corporation or other
legal entity, 
other than a title insurance company or a title insurance

agent, which receives deposits, in trust, of funds or 
documents, or both, for
the purpose of effecting the sale, 
transfer, encumbrance or lease of real
property to be held by 
such escrowee until title to the real property that
is the 
subject of the escrow is in a prescribed condition.  Federal and

State chartered banks, savings and loan associations, credit 
unions,
mortgage bankers, banks or trust companies authorized 
to do business under
the Illinois Corporate Fiduciary Act, 
licensees under the Consumer
Installment Loan Act, real estate 
brokers licensed pursuant to the Real
Estate License Act of 
2000, as such Acts are now or hereafter amended, and
licensed 
attorneys when engaged in the attorney-client relationship are

exempt from the escrow provisions of this Act. "Independent 
Escrowee" does not include employees or independent 
contractors of a title insurance company or title insurance 
agent authorized by a title insurance company to perform 
closing, escrow, or settlement services.


    (10) "Single risk" means the insured amount of any title 
insurance
policy, except that where 2 or more title insurance 
policies are issued
simultaneously covering different estates 
in the same real property, "single
risk" means the sum of the 
insured amounts of all such title insurance
policies.  Any title 
insurance policy insuring a mortgage interest, a claim
payment 
under which reduces the insured amount of a fee or leasehold 
title
insurance policy, shall be excluded in computing the 
amount of a single
risk to the extent that the insured amount 
of the mortgage title insurance
policy does not exceed the 
insured amount of the fee or leasehold title
insurance policy.

    (11) "Department" means the Department of Financial and 
Professional Regulation.

    (12) "Secretary" means the Secretary

of Financial and 
Professional Regulation.

    (13) "Insured closing letter" or "closing protection 
letter" means
an indemnification or undertaking to a party to a 
real property estate transaction, from
a principal such as a 
title insurance company or similar entity, setting forth
in 
writing the extent of the principal's responsibility for 
intentional
misconduct or errors in closing the real property 
estate transaction on the part of a
settlement agent, such as a 
title insurance agent or other settlement service
provider, and 
includes protection afforded pursuant to subsections (f), (g), 
and (h) of Section 16 and Section 16.1 of this Act even if such 
protection is afforded by contract.

    (14) "Residential real property" means a building or 
buildings consisting of one to 4 residential units or a 
residential condominium unit where at least one of the 
residential units or condominium units is occupied or intended 
to be occupied as a residence by the purchaser or borrower, or 
in the event that the purchaser or borrower is the trustee of a 
trust, by a beneficiary of that trust.

(Source: P.A. 94-893, eff. 6-20-06; 95-570, eff. 8-31-07.)

 



    (215 ILCS 155/16)  (from Ch. 73, par. 1416)



    Sec. 16. Title insurance agents. 

    (a) No person, firm, partnership, association, corporation 
or other
legal entity shall act as or hold itself out to be a 
title insurance agent
unless duly registered by a title 
insurance company with the Secretary.

    (b) Each application for registration shall be made on a 
form specified
by the Secretary and prepared in duplicate by 
each title insurance company
which the agent represents.  The 
title insurance company shall retain the
copy of the 
application and forward the original to the Secretary with the

appropriate fee.

    (c) Every applicant for registration, except a firm, 
partnership,
association or corporation, must be 18 years or 
more of age.

    (d) Registration shall be made annually by a filing with 
the Secretary;
supplemental registrations for new title 
insurance agents to be added
between annual filings shall be 
made from time to time in the manner
provided by the Secretary; 
registrations shall remain in effect unless
revoked or 
suspended by the Secretary or
voluntarily withdrawn by the

registrant or the title insurance company.

    (e) Funds deposited in connection with any escrows, 
settlements, or closings shall be deposited in a separate 
fiduciary trust account or accounts in a bank or other 
financial institution insured by an agency of the federal 
government unless the instructions provide otherwise. The 
funds shall be the property of the person or persons entitled 
thereto under the provisions of the escrow, settlement, or 
closing and shall be segregated by escrow, settlement, or 
closing in the records of the escrow agent. The funds shall not 
be subject to any debts of the escrowee and shall be used only 
in accordance with the terms of the individual escrow, 
settlement, or closing under which the funds were accepted.
    Interest received on funds deposited with the escrow agent 
in connection with any escrow, settlement, or closing shall be 
paid to the depositing party unless the instructions provide 
otherwise.
    The escrow agent shall maintain separate records of all 
receipts and disbursements of escrow, settlement, or closing 
funds.
    The escrow agent shall comply with any rules adopted by the 
Secretary pertaining to escrow, settlement, or closing 
transactions.
    (f) A title insurance agent shall not act as an escrow 
agent in a nonresidential real property transaction where the 
amount of settlement funds on deposit with the escrow agent is 
less than $2,000,000 or in a residential real property 
transaction unless the title insurance agent, title insurance 
company, or another authorized title insurance agent has 
committed for the issuance of title insurance in that 
transaction and the title insurance agent is authorized to act 
as an escrow agent on behalf of the title insurance company for 
which the commitment for title insurance has been issued.  The 
authorization under the preceding sentence shall be given 
either (1) by an agency contract with the title insurance 
company which contract, in compliance with the requirements set 
forth in subsection (g) of this Section, authorizes the title 
insurance agent to act as an escrow agent on behalf of the 
title insurance company or (2) by a closing protection letter 
in compliance with the requirements set forth in Section 16.1 
of this Act, issued by the title insurance company to the 
seller, buyer, borrower, and lender.  A closing protection 
letter shall not be issued by a title insurance agent.  The 
provisions of this subsection (f) shall not apply to the 
authority of a title insurance agent to act as an escrow agent 
under subsection (g) of Section 17 of this Act.
    (g) If an agency contract between the title insurance 
company and the title insurance agent is the source of the 
authority under subsection (f) of this Section for a title 
insurance agent to act as escrow agent for a real property 
transaction, then the agency contract shall provide for no less 
protection from the title insurance company to all parties to 
the real property transaction than the title insurance company 
would have provided to those parties had the title insurance 
company issued a closing protection letter in conformity with 
Section 16.1 of this Act. 
    (h) A title insurance company shall be liable for the acts 
or omissions of its title insurance agent as an escrow agent if 
the title insurance company has authorized the title insurance 
agent under subsections (f) and (g) of this Section 16 and only 
to the extent of the liability undertaken by the title 
insurance company in the agency agreement or closing protection 
letter.  The liability, if any, of the title insurance agent to 
the title insurance company for acts and omissions of the title 
insurance agent as an escrow agent shall not be limited or 
otherwise modified because the title insurance company has 
provided closing protection to a party or parties to a real 
property transaction escrow, settlement, or closing.  The 
escrow agent shall not charge a fee for protection provided by 
a title insurance company to parties to real property 
transactions under subsections (f) and (g) of this Section 16 
and Section 16.1, but shall collect from the parties the fee 
charged by the title insurance company and shall promptly remit 
the fee to the title insurance company. The title insurance 
company may charge the parties a reasonable fee for protection 
provided pursuant to subsections (f) and (g) of this Section 16 
and Section 16.1 and shall not pay any portion of the fee to 
the escrow agent.  The payment of any portion of the fee to the 
escrow agent by the title insurance company, shall be deemed a 
prohibited inducement or compensation in violation of Section 
24 of this Act. 
    (i) The Secretary shall adopt and amend such rules as may 
be required for the proper administration and enforcement of 
this Section 16 consistent with the federal Real Estate 
Settlement Procedures Act and Section 24 of this Act. 
(Source: P.A. 94-893, eff. 6-20-06.)

 
    (215 ILCS 155/16.1 new)
    Sec. 16.1. Closing or settlement protection.
    (a) Notwithstanding the provisions of item (iii) of 
paragraph (B) of subsection (1) and subsections (3) and (8) of 
Section 3 and Section 16 of this Act, a title insurance company 
or title insurance agent is not authorized to act as an escrow 
agent in a nonresidential real property transaction where the 
amount of settlement funds on deposit with the escrow agent is 
less than $2,000,000 or in a residential real property 
transaction unless as part of the same transaction a 
commitment, binder, or title insurance policy and closing 
protection letters protecting the buyer's or borrower's, 
lender's, and seller's interests have been issued by the title 
insurance company on whose behalf the commitment, binder, or 
title insurance policy has been issued. Closing protection 
letters are not required when the authorization for the title 
insurance agent to act as an escrow agent is given by an agency 
contract with the title insurance company pursuant to 
subsections (f), (g), and (h) of Section 16 of this Act, but 
shall be issued by the title insurance company upon the request 
of a party to a nonresidential real property transaction where 
the amount of settlement funds on deposit with the escrow agent 
is less than $2,000,000 or in a residential real property 
transaction. 
    (b) Unless otherwise agreed to between a title insurance 
company and a protected person or entity, a closing protection 
letter under this Section  shall indemnify all parties to a real 
property transaction against actual loss, not to exceed the 
amount of the settlement funds deposited with the escrow agent. 
The closing protection letter shall in any event indemnify all 
parties to a real property transaction when such losses arise 
out of:
        (1) failure of the escrow agent to comply with written 
    closing instructions to the extent that they relate to (A) 
    the status of the title to an interest in land or the 
    validity, enforceability, and priority of the lien of a 
    mortgage on an interest in land, including the obtaining of 
    documents and the disbursement of funds necessary to 
    establish the status of title or lien or (B) the obtaining 
    of any other document specifically required by a party to 
    the real property transaction, but only to the extent that 
    the failure to obtain such other document affects the 
    status of the title to an interest in land or the validity, 
    enforceability, and priority of the lien of a mortgage on 
    an interest in land; or
        (2) fraud, dishonesty, or negligence of the escrow 
    agent in handling funds or documents in connection with 
    closings to the extent that the fraud, dishonesty, or 
    negligence relates to the status of the title to the 
    interest in land or to the validity, enforceability, and 
    priority of the lien of a mortgage on an interest in land 
    or, in the case of a seller, to the extent that the fraud, 
    dishonesty, or negligence relates to funds paid to or on 
    behalf of, or which should have been paid to or on behalf 
    of, the seller.
    (c)  The indemnification under a closing protection letter 
may include limitations on the liability of the title insurance 
company for any of the following:
        (1)  Failure of the escrow agent to comply with closing 
    instructions that require title insurance protection 
    inconsistent with that set forth in the title insurance 
    commitment for the real property transaction.  Instructions 
    that require the removal of specific exceptions to title or 
    compliance with the requirements contained in the title 
    insurance commitment shall not be deemed to be 
    inconsistent.
        (2)  Loss or impairment of funds in the course of 
    collection or while on deposit with a bank due to bank 
    failure, insolvency, or suspension, except such as shall 
    result from failure of the escrow agent closer to comply 
    with written closing instructions to deposit the funds in a 
    bank that is designated by name by a party to the real 
    property transaction.
        (3)  Mechanics' and materialmen's liens in connection 
    with sale, purchase, lease, or construction loan 
    transactions, except to the extent that protection against 
    such liens is afforded by a title insurance commitment or 
    policy issued by the escrow agent.
        (4)  Failure of the escrow agent to comply with written 
    closing instructions to the extent that such instructions 
    require a determination by the escrow agent of the 
    validity, enforceability, or effectiveness of any document 
    described in subitem (B) of item (1) of subsection (b) of 
    this Section.
        (5)   Fraud, dishonesty, or negligence of an employee, 
    agent, attorney, or broker, who is not also the escrow 
    agent or an independent contract closer of the escrow 
    agent, of the indemnified party to the real property 
    transaction.
        (6)  The settlement or release of any claim by the 
    indemnified party to the real property transaction without 
    the written consent of the title insurance company.
        (7)  Any matters created, suffered, assumed, or agreed 
    to by, or known to, the indemnified party to the real 
    property transaction without the written consent of the 
    title insurance company.
    The closing protection letter may also include reasonable 
additional provisions concerning the dollar amount of 
protection, provided such limit is not less than the amount 
deposited with the escrow agent, arbitration, subrogation, 
claim notices, and other conditions and limitations that do not 
materially impair the protection required by this Section 16.1.
    (d)  This Section shall not apply to the authority of a 
title insurance company and title insurance agent to act as an 
escrow agent under subsection (g) of Section 17 of this Act.
    (e) The Secretary shall adopt and amend such rules as may 
be required for the proper administration and enforcement of 
this Section 16.1 consistent with the federal Real Estate 
Settlement Procedures Act and Section 24 of this Act. 



 
    Section 99. Effective date. This Act takes effect January 
1, 2011.