12404. (a) It is unlawful for any title insurer, underwritten
title company or controlled escrow company to pay, directly or
indirectly, any commission, compensation, or other consideration to
any person as an inducement for the placement or referral of title
business. Actual placement or referral of title business is not a
precondition to a violation of this section, whether the violation is
or is not a per se violation pursuant to subdivision (c).
(b) For purposes of this section, the following definitions are
applicable:
(1) "Compensating balance" is a balance maintained in a lending
institution by any title insurer, underwritten title company, or
controlled escrow company for the express or implied purpose of
influencing the extension of credit to a third party or the provision
of goods, services, or benefits to a third party as an inducement
for the placement or referral of title business by a third party.
(2) "Person" means any individual or entity who is any owner or
prospective owner, lessee or prospective lessee of real property or
any interest therein, any obligee or prospective obligee of an
obligation secured or to be secured either in whole or in part by
real property or any interest therein, or any person who is acting or
who is in the business of acting as agent, representative, attorney,
or employee of those persons.
(3) "Title business" means the "business of title insurance" as
defined in Section 12340.3, and includes, but is not limited to, the
offering of title insurance, escrow, or other services by a title
insurer, underwritten title company, or controlled escrow company.
(c) The following activities, whether performed directly or
indirectly, are deemed per se inducements for the placement or
referral of title insurance business by any person and are unlawful:
(1) Paying or offering to pay, furnishing or offering to furnish,
or providing or offering to provide assistance with the business
expenses of any person, including, but not limited to, rent, employee
salaries, furniture, copiers, facsimile machines, automobiles,
telephone services or equipment, or computers.
(2) Providing or offering to provide any form of consideration
intended for the benefit of any person, including cash, below market
rate loans, automobile charges, or merchandise or merchandise
credits.
(3) Placing or offering to place on behalf of any person,
compensating balances.
(4) Advancing or paying or offering to advance or pay money on
behalf of any person into an escrow to facilitate the closing
thereof, other than any sum which represents the proceeds of a loan
made in the ordinary course of business; or an advance not to exceed
2 percent of the sales price of the real property being sold or
exchanged through the escrow or the amount of any loan secured by
real property involved in the escrow, whichever is greater; or the
extension of credit or an advance for the costs, fees and expenses of
the escrow or of the title insurance issued or to be issued in
connection therewith.
(5) Disbursing or offering to disburse on behalf of any person
escrow funds held by a title insurer, underwritten title company or
controlled escrow company before the conditions of the escrow
applicable to that disbursement have been met, or in a manner which
does not conform to Section 12413.1, including disbursing or offering
to disburse before the expiration of the appropriate period
established in Section 12413.1.
(6) Furnishing or offering to furnish all or any part of the time
or productive effort of any employee of the title insurer,
underwritten title company, or controlled escrow company to any
person for any service unrelated to the title business.
(7) Advertising or paying for the advertising in any newspaper,
newsletter, magazine, or publication that is produced by, or on
behalf of, a person, or that results in a direct, or indirect,
subsidy to a person.
(8) Expenditures for food, beverages, and entertainment for a
person.
(d) Expenditures for the following are not deemed to be unlawful
or in violation of this section:
(1) Promotional items with a permanently affixed company logo of
the underwritten title company, title insurer, or controlled escrow
company, with a value of not more than ten dollars ($10) each.
"Promotional item" does not include a gift certificate, gift card, or
other item that has a specific monetary value on its face, or that
may be exchanged for any other item having a specific monetary value.
(2) Furnishing education or educational materials exclusively
related to the business of title insurance for a person if continuing
education credits are not provided.
(3) Other expenditures for a person, as permitted by the
Department of Insurance by regulation.
(e) The provision or payment of any form of consideration as an
inducement for the placement or referral of title business not
specifically set forth in this section shall not be presumed lawful
merely because they are not specifically prohibited.
(f) The Insurance Commissioner may determine compliance and
enforce the provisions of this section by written order, regulation
or written consent which may take into consideration standards,
conditions, guidelines, principles, or definitions utilized by other
states or federal agencies but those standards, conditions,
guidelines, principles, or definitions shall not be determinative.
(g) It is the intent of the Legislature that the enactment of this
section shall have no effect on the applicability of other sections
of the Insurance Code that are in existence prior to the enactment of
this section and which specifically, or by implication, refer to
this section. The Legislature hereby intends that this section,
including the specific terms employed within it, shall be liberally
construed for the purpose of protecting consumers of title business.
12404.1. The furnishing of a preliminary report by any title
insurer, controlled escrow company or underwritten title company,
without charge to any person, shall constitute a violation of Section
12404. The charge for a preliminary report shall have a reasonable
relation to the cost of production of the report but in no event
shall it be less than the rate for a standard owners policy, minimum
liability, as set forth in the company's rate schedule. After billing
any person for a preliminary report the title insurer, controlled
escrow company or underwritten title company shall promptly make a
good faith attempt to collect; provided, however, that
notwithstanding Section 12404, but without limiting the applicability
of that section to other transactions, this charge may be waived or
canceled, if the company follows uniform practices as to all
customers under like circumstances.
(a) After the issuance of the preliminary report, but before the
charge is waived or canceled, the files of the issuing company
contain a copy of a bona fide sales or exchange agreement, or loan
commitment executed by the party or parties in interest relating to
the property described in the report, and the sale, exchange, or loan
is not consummated.
(b) When the preliminary report so furnished contains a lien or
encumbrance or other title defect which the issuing company has
refused to eliminate from its policy of title insurance or to provide
insurance against loss by reason thereof, and another title
insurance company has eliminated the lien or encumbrance or other
title defect from its policy of title insurance or provided insurance
against loss resulting therefrom within a reasonable period of time
from the date of the issuance of the preliminary report.
The furnishing of the names of owners of record, descriptions of
real property, and property characteristics, as defined in Section
408.3 of the Revenue and Taxation Code, shall not be deemed to be a
violation of Section 12404, whether provided on individual or
multiple properties and whether provided in printed form or by
electronic media.
12404.5. As used in this section "personal or controlled insurance"
means a policy of title insurance, or insurance as to the identity,
due execution and validity of any note or bond secured by mortage, or
the identity, due execution, validity and recording of any such
mortgage, or any other service afforded by title insurers the rate
for which is required to be filed by Article 5.5 (commencing with
Section 12401) of this chapter, where the insured or one of the
insured under such policy is, or the loss thereunder is payable to,
an underwritten title company, a controlled escrow company, or an
issuing agent, or
(a) If such underwritten or controlled company or issuing agent is
a natural person: (1) his spouse, his employer or his employer's
spouse, or (2) any person related to him or the persons mentioned in
(1) of this paragraph within the second degree by blood or marriage,
or (3) if his employer is a corporation, any person directly or
indirectly owning or controlling a majority of the voting stock or
controlling interest in such corporation, or (4) if his employer is a
partnership or association, any person owning any interest in such
partnership or association.
(b) If such underwritten or controlled company or issuing agent is
a corporation: (1) any person directly or indirectly owning or
controlling a majority of the voting stock or controlling interest in
such corporation, or (2) any corporation which is directly or
indirectly controlled by a person who also controls the underwritten
title company, controlled escrow company, or issuing agent, as
described in (1), or (3) any corporation making consolidated returns
for United States income tax purposes with any corporation described
in (1) or (2) of this paragraph.
If the fees and charges for personal or controlled insurance so
issued in any one calendar year received by an underwritten title
company, a controlled escrow company or an issuing agent exceed the
fees and charges received for other title insurance issued at the
instance or request of such underwritten title company, controlled
escrow company or issuing agent in the same year, the excess is an
unlawful rebate. Violation of this section by a title insurer shall
not be subject to the penalty provided for in Section 12409.
12405. No title insurer, no controlled escrow company, and no
underwritten title company shall make any rebate of any portion of
the fee or charge shown by the schedule required by Section 12401.1.
No title insurer, no controlled escrow company and no underwritten
title company shall quote any fee or make any charge for a title
policy to any person which is less than that currently available to
others for the same type of title policy in a like amount covering
property in the same county and involving the same factors as set
forth in its then currently effective schedule of fees and charges.
The amount by which any fee or charge is less than that called for by
the then currently effective schedule of fees and charges of the
title insurer is an unlawful rebate; provided, that nothing contained
in this article shall prohibit bulk rates or special rates for
customers of prescribed classes if such bulk or special rates are
provided for in such schedule.
12405.7. In addition to other acts prohibited by this article, no
controlled escrow company or title insurer or other person engaged in
the business of selling or furnishing to the public, directly or
indirectly, evidence to title to real property shall:
(a) Pay for or furnish or offer to pay for or furnish any part of
the advertising or promotional material of the customer in connection
with the sale or encumbrance of real property.
(b) Pay or offer to pay for any evidence of title or copy or
contents thereof not produced or issued by such person or company if
such evidence of title relates to a current real property
transaction, except as provided in Section 12412.
12406. No title insurer shall issue any title policy in any
transaction in connection with which it or any person which is a
controlled escrow company or underwritten title company by reason of
its relationship with such title insurer has paid or contemplates
paying any commission in violation of Section 12404 or in connection
with which it or any such controlled escrow company or underwritten
title company has made or contemplates making any unlawful rebate in
violation of Section 12405.
12406.5. (a) The commissioner shall develop, publish, and
disseminate a brochure for consumers who are required to buy title
insurance as part of a residential real estate transaction. The
brochure shall inform consumers that competing title insurers and
underwritten title companies may offer different costs or services
for the title insurance required in the transaction. The brochure
shall also inform consumers about the potential availability of
discounts in cases involving first-time buyers, short-term rates if a
home is resold in less than a five-year period, concurrent rates if
the company is providing both the homeowners' and the lenders' title
insurance policies in the transaction, subdivision bulk rates if the
property being purchased is in a new subdivision, refinancing
discounts, short-term financing rates, and discounts that may be
available in other special cases. The brochure shall encourage
consumers to contact more than one title insurer or underwritten
title company in order to compare costs and services.
(b) The brochure developed pursuant to subdivision (a) shall
include the department's toll-free consumer assistance telephone
number and shall invite consumers to call the department if they need
assistance.
(c) The department shall display the brochure developed pursuant
to subdivision (a) on its Internet website, and the brochure shall
include the department's Internet address.
(d) The brochure developed pursuant to subdivision (a) shall also
educate consumers about laws involving unlawful commissions and
rebates associated with the placement or referral of title insurance
and shall encourage consumers to report to the department, to the
Department of Real Estate, and to any other appropriate government
agencies any suspected incidents of probable unlawful commissions or
rebates subject to Article 6.5 (commencing with Section 12414).
(e) One copy of the brochure developed pursuant to this section
shall be made available to a member of the public at no cost, and the
department may charge its actual cost for providing additional
copies. The brochure shall be made available for reproduction at no
cost to any vendor who wishes to publish the brochure as written,
provided any vendor who wishes to publish the brochure agrees to
submit any documents containing the brochure to the department prior
to publication.
12407. The commissioner, if he has reason to believe that any
controlled escrow company or any underwritten title company has
violated or is violating any of the provisions of this article, has
the power and it is his duty to forthwith examine its books, records
and accounts and in making any such examination he has all the power
set forth in Article 4, Chapter 1 of Part 2 of Division 1 of this
code and any company so examined shall pay to the commissioner the
cost of such examination on demand. Whenever the commissioner
examines a title insurer, he shall make such examination of its
books, records, and files as may be necessary in his judgment to
determine whether or not it has violated or is violating any of the
provisions of this article.
12408. Every title insurer shall include in its annual statement
furnished the commissioner pursuant to Article 10 (commencing with
Section 900), Chapter 1, Part 2, Division 1 of this code, the name of
each person which is a controlled escrow company or underwritten
title company by reason of its relationship with such title insurer.
12408.1. Whenever a title insurer terminates its underwriting
agreement with any underwritten title company, it shall at the same
time give notice of the termination to the commissioner.
12408.5. (a) Notwithstanding any other provision of this article no
title insurer, no controlled escrow company, and no underwritten
title company shall pay any commission for the solicitation or
negotiation of any services constituting the business of title
insurance.
(b) The provisions of subdivision (a) notwithstanding, a title
insurer, controlled escrow company, or underwritten title company may
pay to full-time salaried employees a commission, incentive
compensation or bonuses based on any such employees' level of
production of any services constituting the business of title
insurance. Any title insurer, controlled escrow company, or
underwritten title company and, where applicable their affiliates,
which makes such payments shall maintain adequate records detailing
the conditions to receipt of any commission, incentive compensation
or bonus, the recipient thereof and the amount paid.
(c) Any employee of a title insurer, underwritten title company,
or controlled escrow company shall not, directly or indirectly, pay
or offer to pay, either directly or indirectly, any part of his or
her compensation, whether denominated salary, incentive compensation,
or bonuses to any person or entity defined in Section 12404, as an
inducement for, or as compensation for, any title insurance business
or any escrow or other title business, and any payment or offer to
pay this consideration is an unlawful rebate.
12409. (a) Every title insurer, controlled escrow company, and
underwritten title company which pays any commission or which makes
any unlawful rebate in violation of this article shall be liable to
the people of California for five times the amount of that commission
or unlawful rebate, the amount thereof to be recovered by the
commissioner pursuant to Section 12976. In addition to, or in lieu
of, any other penalty that may be imposed under this code, the
commissioner may, after a hearing, issue an order to restrict or
suspend the certificate of authority of any title insurer or
controlled escrow company or the license of any underwritten title
company. The commissioner may restrict or suspend the certificate of
authority or license on a statewide basis or in specified counties.
(b) In no event shall the total or aggregate amount recovered by
the commissioner from a title insurer, controlled escrow company, or
underwritten title company pursuant to this section be less than five
thousand dollars ($5,000).
12410. In enforcing any of the provisions of this article, the
commissioner shall be entitled to the remedies provided for in
Section 12928.6 of this code.
12411. The commissioner may after a hearing suspend or revoke the
certificate of authority of any title insurer or the license of any
underwritten title company licensed pursuant to the provisions of
Section 12389, which, after 10 days' written notice from the
commissioner requiring it to comply with the provisions of this
article willfully fails to do so.
12412. Nothing in this article prohibits the division of fees or
charges, for work and services actually performed, between title
insurers or between title insurers and underwritten title companies
or between underwritten title companies, if such division does not
constitute an unlawful rebate as defined by Section 12404.5, or is
prohibited by Section 12405.7 or 12408.5. The entire charge made to
obtain a title policy shall be set forth on the title policy.
12413.1. No title insurance company, controlled escrow company, or
underwritten title company shall disburse funds from an escrow
account until the day established by the following:
(a) Except for funds deposited by cash or by electronic payment,
deposits accorded next day availability pursuant to Part 229 of Title
12 of the Code of Federal Regulations may not be disbursed until the
business day following the business day of deposit.
(b) Except for drafts, deposits not accorded next day availability
pursuant to Part 229 of Title 12 of the Code of Federal Regulations
shall not be disbursed until the day on which these funds must be
made available to depositors under the federal regulation specified
in this subdivision.
(c) Funds deposited by cash or by electronic payment may be
disbursed following deposit on the same business day as the business
day of deposit.
(d) Notwithstanding the provisions of subdivision (b), deposits
other than drafts may be disbursed on the business day following the
business day of deposit if the financial institution to which the
funds have been deposited informs the title insurance company,
controlled escrow company, or underwritten title company in writing
that final settlement has occurred on the deposited item. For the
purposes of this subdivision, an electronically transmitted document
that specifies that final settlement has occurred constitutes written
notice as to an individual item.
(e) Where a draft, other than a share draft, has been received and
submitted for collection, no title insurance company, controlled
escrow company, or underwritten title company shall disburse funds
from an escrow account with respect to the draft until the proceeds
of the draft have become available for withdrawal from the financial
institution to which the draft has been submitted for collection. For
purposes of this subdivision, "available for withdrawal" means when
the draft has been submitted for collection and payment received.
Notwithstanding this subdivision, disbursement of funds represented
by share drafts shall be governed by subdivisions (b) and (d), if
applicable.
(f) For purposes of this section, "escrow account" means any
depository account with a financial institution to which funds are
deposited with respect to any transaction wherein one person, for the
purpose of effecting the sale, transfer, encumbering or leasing of
real or personal property to another person, delivers any written
instrument, money, evidence of title to real or personal property, or
other thing of value to a third person to be held by that third
person until the happening of a specified event or the performance of
a prescribed condition, when it is then to be delivered by that
third person to a grantee, grantor, promisee, promisor, obligee,
obligor, bailee, bailor, or any agency or employee of the latter.
(g) Except as provided in subdivision (h), for purposes of this
section, any word or term used herein or relevant to interpretation
of this section, including, but not limited to, "available for
withdrawal," "check," "electronic payment," and "business day," which
is defined in Part 229 of Title 12 of the Code of Federal
Regulations on January 1, 1990, shall have the meaning there given as
the regulations existed on January 1, 1990.
(h) For purposes of this section, "financial institution" means
any financial institution specified in Section 12413.5.
(i) No title insurance company, controlled escrow company, or
underwritten title company shall be liable for a violation of this
section if the violation was not intentional or resulted from a bona
fide error notwithstanding the maintenance of procedures reasonably
adapted to avoid that error. Examples of bona fide errors include,
but are not limited to, clerical, calculation, computer malfunction
and programming, and printing errors.
(j) Nothing in this section shall be deemed to prohibit the
recordation of documents prior to the time funds are available for
disbursement with respect to a transaction provided the parties to
the transaction consent in writing prior thereto.
(k) Nothing in this section is intended to amend, alter, or
supersede other sections of this code, or other laws of this state or
the United States, regarding an escrow holder's duties and
obligations.
12413.2. Any item or draft received by a title insurance company,
controlled escrow company, or underwritten title company in
connection with any escrow shall be deposited in, or submitted for
collection to, a financial institution as defined in Section 12413 no
later than the close of the next business day following receipt.
For purposes of this section, "item" means any check, including a
cashier's check, negotiable order of withdrawal, share draft,
traveler's check, or money order.
12413.5. All funds received in connection with any escrow conducted
by a title insurance company, controlled escrow company, or
underwritten title company shall be deposited in a separate
depository account in a bank or savings and loan association or in an
account in an industrial loan company insured by the Federal Deposit
Insurance Corporation, and the funds so deposited shall be the
property of the person or persons entitled thereto under the
provisions of the escrow and segregated escrow by escrow in the
records of the title insurance company, controlled escrow company, or
underwritten title company. The funds shall not be subject to any
debts of the title insurance company, controlled escrow company, or
underwritten title company and shall be used only to fulfill the
terms of the individual escrow for which the funds were accepted and
none of the funds shall be utilized until the conditions of the
escrow have been met.
Any interest received on funds deposited in connection with any
escrow which are deposited in a bank, savings and loan association,
or industrial loan company shall be paid over by the escrow to the
depositing party to the escrow unless the escrow is otherwise
instructed by the depositing party, and shall not be transferred to
the account of the title insurance company, controlled escrow
company, or underwritten title company.
12404. (a) It is unlawful for any title insurer, underwritten
title company or controlled escrow company to pay, directly or
indirectly, any commission, compensation, or other consideration to
any person as an inducement for the placement or referral of title
business. Actual placement or referral of title business is not a
precondition to a violation of this section, whether the violation is
or is not a per se violation pursuant to subdivision (c).
(b) For purposes of this section, the following definitions are
applicable:
(1) "Compensating balance" is a balance maintained in a lending
institution by any title insurer, underwritten title company, or
controlled escrow company for the express or implied purpose of
influencing the extension of credit to a third party or the provision
of goods, services, or benefits to a third party as an inducement
for the placement or referral of title business by a third party.
(2) "Person" means any individual or entity who is any owner or
prospective owner, lessee or prospective lessee of real property or
any interest therein, any obligee or prospective obligee of an
obligation secured or to be secured either in whole or in part by
real property or any interest therein, or any person who is acting or
who is in the business of acting as agent, representative, attorney,
or employee of those persons.
(3) "Title business" means the "business of title insurance" as
defined in Section 12340.3, and includes, but is not limited to, the
offering of title insurance, escrow, or other services by a title
insurer, underwritten title company, or controlled escrow company.
(c) The following activities, whether performed directly or
indirectly, are deemed per se inducements for the placement or
referral of title insurance business by any person and are unlawful:
(1) Paying or offering to pay, furnishing or offering to furnish,
or providing or offering to provide assistance with the business
expenses of any person, including, but not limited to, rent, employee
salaries, furniture, copiers, facsimile machines, automobiles,
telephone services or equipment, or computers.
(2) Providing or offering to provide any form of consideration
intended for the benefit of any person, including cash, below market
rate loans, automobile charges, or merchandise or merchandise
credits.
(3) Placing or offering to place on behalf of any person,
compensating balances.
(4) Advancing or paying or offering to advance or pay money on
behalf of any person into an escrow to facilitate the closing
thereof, other than any sum which represents the proceeds of a loan
made in the ordinary course of business; or an advance not to exceed
2 percent of the sales price of the real property being sold or
exchanged through the escrow or the amount of any loan secured by
real property involved in the escrow, whichever is greater; or the
extension of credit or an advance for the costs, fees and expenses of
the escrow or of the title insurance issued or to be issued in
connection therewith.
(5) Disbursing or offering to disburse on behalf of any person
escrow funds held by a title insurer, underwritten title company or
controlled escrow company before the conditions of the escrow
applicable to that disbursement have been met, or in a manner which
does not conform to Section 12413.1, including disbursing or offering
to disburse before the expiration of the appropriate period
established in Section 12413.1.
(6) Furnishing or offering to furnish all or any part of the time
or productive effort of any employee of the title insurer,
underwritten title company, or controlled escrow company to any
person for any service unrelated to the title business.
(7) Advertising or paying for the advertising in any newspaper,
newsletter, magazine, or publication that is produced by, or on
behalf of, a person, or that results in a direct, or indirect,
subsidy to a person.
(8) Expenditures for food, beverages, and entertainment for a
person.
(d) Expenditures for the following are not deemed to be unlawful
or in violation of this section:
(1) Promotional items with a permanently affixed company logo of
the underwritten title company, title insurer, or controlled escrow
company, with a value of not more than ten dollars ($10) each.
"Promotional item" does not include a gift certificate, gift card, or
other item that has a specific monetary value on its face, or that
may be exchanged for any other item having a specific monetary value.
(2) Furnishing education or educational materials exclusively
related to the business of title insurance for a person if continuing
education credits are not provided.
(3) Other expenditures for a person, as permitted by the
Department of Insurance by regulation.
(e) The provision or payment of any form of consideration as an
inducement for the placement or referral of title business not
specifically set forth in this section shall not be presumed lawful
merely because they are not specifically prohibited.
(f) The Insurance Commissioner may determine compliance and
enforce the provisions of this section by written order, regulation
or written consent which may take into consideration standards,
conditions, guidelines, principles, or definitions utilized by other
states or federal agencies but those standards, conditions,
guidelines, principles, or definitions shall not be determinative.
(g) It is the intent of the Legislature that the enactment of this
section shall have no effect on the applicability of other sections
of the Insurance Code that are in existence prior to the enactment of
this section and which specifically, or by implication, refer to
this section. The Legislature hereby intends that this section,
including the specific terms employed within it, shall be liberally
construed for the purpose of protecting consumers of title business.
12404.1. The furnishing of a preliminary report by any title
insurer, controlled escrow company or underwritten title company,
without charge to any person, shall constitute a violation of Section
12404. The charge for a preliminary report shall have a reasonable
relation to the cost of production of the report but in no event
shall it be less than the rate for a standard owners policy, minimum
liability, as set forth in the company's rate schedule. After billing
any person for a preliminary report the title insurer, controlled
escrow company or underwritten title company shall promptly make a
good faith attempt to collect; provided, however, that
notwithstanding Section 12404, but without limiting the applicability
of that section to other transactions, this charge may be waived or
canceled, if the company follows uniform practices as to all
customers under like circumstances.
(a) After the issuance of the preliminary report, but before the
charge is waived or canceled, the files of the issuing company
contain a copy of a bona fide sales or exchange agreement, or loan
commitment executed by the party or parties in interest relating to
the property described in the report, and the sale, exchange, or loan
is not consummated.
(b) When the preliminary report so furnished contains a lien or
encumbrance or other title defect which the issuing company has
refused to eliminate from its policy of title insurance or to provide
insurance against loss by reason thereof, and another title
insurance company has eliminated the lien or encumbrance or other
title defect from its policy of title insurance or provided insurance
against loss resulting therefrom within a reasonable period of time
from the date of the issuance of the preliminary report.
The furnishing of the names of owners of record, descriptions of
real property, and property characteristics, as defined in Section
408.3 of the Revenue and Taxation Code, shall not be deemed to be a
violation of Section 12404, whether provided on individual or
multiple properties and whether provided in printed form or by
electronic media.
12404.5. As used in this section "personal or controlled insurance"
means a policy of title insurance, or insurance as to the identity,
due execution and validity of any note or bond secured by mortage, or
the identity, due execution, validity and recording of any such
mortgage, or any other service afforded by title insurers the rate
for which is required to be filed by Article 5.5 (commencing with
Section 12401) of this chapter, where the insured or one of the
insured under such policy is, or the loss thereunder is payable to,
an underwritten title company, a controlled escrow company, or an
issuing agent, or
(a) If such underwritten or controlled company or issuing agent is
a natural person: (1) his spouse, his employer or his employer's
spouse, or (2) any person related to him or the persons mentioned in
(1) of this paragraph within the second degree by blood or marriage,
or (3) if his employer is a corporation, any person directly or
indirectly owning or controlling a majority of the voting stock or
controlling interest in such corporation, or (4) if his employer is a
partnership or association, any person owning any interest in such
partnership or association.
(b) If such underwritten or controlled company or issuing agent is
a corporation: (1) any person directly or indirectly owning or
controlling a majority of the voting stock or controlling interest in
such corporation, or (2) any corporation which is directly or
indirectly controlled by a person who also controls the underwritten
title company, controlled escrow company, or issuing agent, as
described in (1), or (3) any corporation making consolidated returns
for United States income tax purposes with any corporation described
in (1) or (2) of this paragraph.
If the fees and charges for personal or controlled insurance so
issued in any one calendar year received by an underwritten title
company, a controlled escrow company or an issuing agent exceed the
fees and charges received for other title insurance issued at the
instance or request of such underwritten title company, controlled
escrow company or issuing agent in the same year, the excess is an
unlawful rebate. Violation of this section by a title insurer shall
not be subject to the penalty provided for in Section 12409.
12405. No title insurer, no controlled escrow company, and no
underwritten title company shall make any rebate of any portion of
the fee or charge shown by the schedule required by Section 12401.1.
No title insurer, no controlled escrow company and no underwritten
title company shall quote any fee or make any charge for a title
policy to any person which is less than that currently available to
others for the same type of title policy in a like amount covering
property in the same county and involving the same factors as set
forth in its then currently effective schedule of fees and charges.
The amount by which any fee or charge is less than that called for by
the then currently effective schedule of fees and charges of the
title insurer is an unlawful rebate; provided, that nothing contained
in this article shall prohibit bulk rates or special rates for
customers of prescribed classes if such bulk or special rates are
provided for in such schedule.
12405.7. In addition to other acts prohibited by this article, no
controlled escrow company or title insurer or other person engaged in
the business of selling or furnishing to the public, directly or
indirectly, evidence to title to real property shall:
(a) Pay for or furnish or offer to pay for or furnish any part of
the advertising or promotional material of the customer in connection
with the sale or encumbrance of real property.
(b) Pay or offer to pay for any evidence of title or copy or
contents thereof not produced or issued by such person or company if
such evidence of title relates to a current real property
transaction, except as provided in Section 12412.
12406. No title insurer shall issue any title policy in any
transaction in connection with which it or any person which is a
controlled escrow company or underwritten title company by reason of
its relationship with such title insurer has paid or contemplates
paying any commission in violation of Section 12404 or in connection
with which it or any such controlled escrow company or underwritten
title company has made or contemplates making any unlawful rebate in
violation of Section 12405.
12406.5. (a) The commissioner shall develop, publish, and
disseminate a brochure for consumers who are required to buy title
insurance as part of a residential real estate transaction. The
brochure shall inform consumers that competing title insurers and
underwritten title companies may offer different costs or services
for the title insurance required in the transaction. The brochure
shall also inform consumers about the potential availability of
discounts in cases involving first-time buyers, short-term rates if a
home is resold in less than a five-year period, concurrent rates if
the company is providing both the homeowners' and the lenders' title
insurance policies in the transaction, subdivision bulk rates if the
property being purchased is in a new subdivision, refinancing
discounts, short-term financing rates, and discounts that may be
available in other special cases. The brochure shall encourage
consumers to contact more than one title insurer or underwritten
title company in order to compare costs and services.
(b) The brochure developed pursuant to subdivision (a) shall
include the department's toll-free consumer assistance telephone
number and shall invite consumers to call the department if they need
assistance.
(c) The department shall display the brochure developed pursuant
to subdivision (a) on its Internet website, and the brochure shall
include the department's Internet address.
(d) The brochure developed pursuant to subdivision (a) shall also
educate consumers about laws involving unlawful commissions and
rebates associated with the placement or referral of title insurance
and shall encourage consumers to report to the department, to the
Department of Real Estate, and to any other appropriate government
agencies any suspected incidents of probable unlawful commissions or
rebates subject to Article 6.5 (commencing with Section 12414).
(e) One copy of the brochure developed pursuant to this section
shall be made available to a member of the public at no cost, and the
department may charge its actual cost for providing additional
copies. The brochure shall be made available for reproduction at no
cost to any vendor who wishes to publish the brochure as written,
provided any vendor who wishes to publish the brochure agrees to
submit any documents containing the brochure to the department prior
to publication.
12407. The commissioner, if he has reason to believe that any
controlled escrow company or any underwritten title company has
violated or is violating any of the provisions of this article, has
the power and it is his duty to forthwith examine its books, records
and accounts and in making any such examination he has all the power
set forth in Article 4, Chapter 1 of Part 2 of Division 1 of this
code and any company so examined shall pay to the commissioner the
cost of such examination on demand. Whenever the commissioner
examines a title insurer, he shall make such examination of its
books, records, and files as may be necessary in his judgment to
determine whether or not it has violated or is violating any of the
provisions of this article.
12408. Every title insurer shall include in its annual statement
furnished the commissioner pursuant to Article 10 (commencing with
Section 900), Chapter 1, Part 2, Division 1 of this code, the name of
each person which is a controlled escrow company or underwritten
title company by reason of its relationship with such title insurer.
12408.1. Whenever a title insurer terminates its underwriting
agreement with any underwritten title company, it shall at the same
time give notice of the termination to the commissioner.
12408.5. (a) Notwithstanding any other provision of this article no
title insurer, no controlled escrow company, and no underwritten
title company shall pay any commission for the solicitation or
negotiation of any services constituting the business of title
insurance.
(b) The provisions of subdivision (a) notwithstanding, a title
insurer, controlled escrow company, or underwritten title company may
pay to full-time salaried employees a commission, incentive
compensation or bonuses based on any such employees' level of
production of any services constituting the business of title
insurance. Any title insurer, controlled escrow company, or
underwritten title company and, where applicable their affiliates,
which makes such payments shall maintain adequate records detailing
the conditions to receipt of any commission, incentive compensation
or bonus, the recipient thereof and the amount paid.
(c) Any employee of a title insurer, underwritten title company,
or controlled escrow company shall not, directly or indirectly, pay
or offer to pay, either directly or indirectly, any part of his or
her compensation, whether denominated salary, incentive compensation,
or bonuses to any person or entity defined in Section 12404, as an
inducement for, or as compensation for, any title insurance business
or any escrow or other title business, and any payment or offer to
pay this consideration is an unlawful rebate.
12409. (a) Every title insurer, controlled escrow company, and
underwritten title company which pays any commission or which makes
any unlawful rebate in violation of this article shall be liable to
the people of California for five times the amount of that commission
or unlawful rebate, the amount thereof to be recovered by the
commissioner pursuant to Section 12976. In addition to, or in lieu
of, any other penalty that may be imposed under this code, the
commissioner may, after a hearing, issue an order to restrict or
suspend the certificate of authority of any title insurer or
controlled escrow company or the license of any underwritten title
company. The commissioner may restrict or suspend the certificate of
authority or license on a statewide basis or in specified counties.
(b) In no event shall the total or aggregate amount recovered by
the commissioner from a title insurer, controlled escrow company, or
underwritten title company pursuant to this section be less than five
thousand dollars ($5,000).
12410. In enforcing any of the provisions of this article, the
commissioner shall be entitled to the remedies provided for in
Section 12928.6 of this code.
12411. The commissioner may after a hearing suspend or revoke the
certificate of authority of any title insurer or the license of any
underwritten title company licensed pursuant to the provisions of
Section 12389, which, after 10 days' written notice from the
commissioner requiring it to comply with the provisions of this
article willfully fails to do so.
12412. Nothing in this article prohibits the division of fees or
charges, for work and services actually performed, between title
insurers or between title insurers and underwritten title companies
or between underwritten title companies, if such division does not
constitute an unlawful rebate as defined by Section 12404.5, or is
prohibited by Section 12405.7 or 12408.5. The entire charge made to
obtain a title policy shall be set forth on the title policy.
12413.1. No title insurance company, controlled escrow company, or
underwritten title company shall disburse funds from an escrow
account until the day established by the following:
(a) Except for funds deposited by cash or by electronic payment,
deposits accorded next day availability pursuant to Part 229 of Title
12 of the Code of Federal Regulations may not be disbursed until the
business day following the business day of deposit.
(b) Except for drafts, deposits not accorded next day availability
pursuant to Part 229 of Title 12 of the Code of Federal Regulations
shall not be disbursed until the day on which these funds must be
made available to depositors under the federal regulation specified
in this subdivision.
(c) Funds deposited by cash or by electronic payment may be
disbursed following deposit on the same business day as the business
day of deposit.
(d) Notwithstanding the provisions of subdivision (b), deposits
other than drafts may be disbursed on the business day following the
business day of deposit if the financial institution to which the
funds have been deposited informs the title insurance company,
controlled escrow company, or underwritten title company in writing
that final settlement has occurred on the deposited item. For the
purposes of this subdivision, an electronically transmitted document
that specifies that final settlement has occurred constitutes written
notice as to an individual item.
(e) Where a draft, other than a share draft, has been received and
submitted for collection, no title insurance company, controlled
escrow company, or underwritten title company shall disburse funds
from an escrow account with respect to the draft until the proceeds
of the draft have become available for withdrawal from the financial
institution to which the draft has been submitted for collection. For
purposes of this subdivision, "available for withdrawal" means when
the draft has been submitted for collection and payment received.
Notwithstanding this subdivision, disbursement of funds represented
by share drafts shall be governed by subdivisions (b) and (d), if
applicable.
(f) For purposes of this section, "escrow account" means any
depository account with a financial institution to which funds are
deposited with respect to any transaction wherein one person, for the
purpose of effecting the sale, transfer, encumbering or leasing of
real or personal property to another person, delivers any written
instrument, money, evidence of title to real or personal property, or
other thing of value to a third person to be held by that third
person until the happening of a specified event or the performance of
a prescribed condition, when it is then to be delivered by that
third person to a grantee, grantor, promisee, promisor, obligee,
obligor, bailee, bailor, or any agency or employee of the latter.
(g) Except as provided in subdivision (h), for purposes of this
section, any word or term used herein or relevant to interpretation
of this section, including, but not limited to, "available for
withdrawal," "check," "electronic payment," and "business day," which
is defined in Part 229 of Title 12 of the Code of Federal
Regulations on January 1, 1990, shall have the meaning there given as
the regulations existed on January 1, 1990.
(h) For purposes of this section, "financial institution" means
any financial institution specified in Section 12413.5.
(i) No title insurance company, controlled escrow company, or
underwritten title company shall be liable for a violation of this
section if the violation was not intentional or resulted from a bona
fide error notwithstanding the maintenance of procedures reasonably
adapted to avoid that error. Examples of bona fide errors include,
but are not limited to, clerical, calculation, computer malfunction
and programming, and printing errors.
(j) Nothing in this section shall be deemed to prohibit the
recordation of documents prior to the time funds are available for
disbursement with respect to a transaction provided the parties to
the transaction consent in writing prior thereto.
(k) Nothing in this section is intended to amend, alter, or
supersede other sections of this code, or other laws of this state or
the United States, regarding an escrow holder's duties and
obligations.
12413.2. Any item or draft received by a title insurance company,
controlled escrow company, or underwritten title company in
connection with any escrow shall be deposited in, or submitted for
collection to, a financial institution as defined in Section 12413 no
later than the close of the next business day following receipt.
For purposes of this section, "item" means any check, including a
cashier's check, negotiable order of withdrawal, share draft,
traveler's check, or money order.
12413.5. All funds received in connection with any escrow conducted
by a title insurance company, controlled escrow company, or
underwritten title company shall be deposited in a separate
depository account in a bank or savings and loan association or in an
account in an industrial loan company insured by the Federal Deposit
Insurance Corporation, and the funds so deposited shall be the
property of the person or persons entitled thereto under the
provisions of the escrow and segregated escrow by escrow in the
records of the title insurance company, controlled escrow company, or
underwritten title company. The funds shall not be subject to any
debts of the title insurance company, controlled escrow company, or
underwritten title company and shall be used only to fulfill the
terms of the individual escrow for which the funds were accepted and
none of the funds shall be utilized until the conditions of the
escrow have been met.
Any interest received on funds deposited in connection with any
escrow which are deposited in a bank, savings and loan association,
or industrial loan company shall be paid over by the escrow to the
depositing party to the escrow unless the escrow is otherwise
instructed by the depositing party, and shall not be transferred to
the account of the title insurance company, controlled escrow
company, or underwritten title company.
12404. (a) It is unlawful for any title insurer, underwritten
title company or controlled escrow company to pay, directly or
indirectly, any commission, compensation, or other consideration to
any person as an inducement for the placement or referral of title
business. Actual placement or referral of title business is not a
precondition to a violation of this section, whether the violation is
or is not a per se violation pursuant to subdivision (c).
(b) For purposes of this section, the following definitions are
applicable:
(1) "Compensating balance" is a balance maintained in a lending
institution by any title insurer, underwritten title company, or
controlled escrow company for the express or implied purpose of
influencing the extension of credit to a third party or the provision
of goods, services, or benefits to a third party as an inducement
for the placement or referral of title business by a third party.
(2) "Person" means any individual or entity who is any owner or
prospective owner, lessee or prospective lessee of real property or
any interest therein, any obligee or prospective obligee of an
obligation secured or to be secured either in whole or in part by
real property or any interest therein, or any person who is acting or
who is in the business of acting as agent, representative, attorney,
or employee of those persons.
(3) "Title business" means the "business of title insurance" as
defined in Section 12340.3, and includes, but is not limited to, the
offering of title insurance, escrow, or other services by a title
insurer, underwritten title company, or controlled escrow company.
(c) The following activities, whether performed directly or
indirectly, are deemed per se inducements for the placement or
referral of title insurance business by any person and are unlawful:
(1) Paying or offering to pay, furnishing or offering to furnish,
or providing or offering to provide assistance with the business
expenses of any person, including, but not limited to, rent, employee
salaries, furniture, copiers, facsimile machines, automobiles,
telephone services or equipment, or computers.
(2) Providing or offering to provide any form of consideration
intended for the benefit of any person, including cash, below market
rate loans, automobile charges, or merchandise or merchandise
credits.
(3) Placing or offering to place on behalf of any person,
compensating balances.
(4) Advancing or paying or offering to advance or pay money on
behalf of any person into an escrow to facilitate the closing
thereof, other than any sum which represents the proceeds of a loan
made in the ordinary course of business; or an advance not to exceed
2 percent of the sales price of the real property being sold or
exchanged through the escrow or the amount of any loan secured by
real property involved in the escrow, whichever is greater; or the
extension of credit or an advance for the costs, fees and expenses of
the escrow or of the title insurance issued or to be issued in
connection therewith.
(5) Disbursing or offering to disburse on behalf of any person
escrow funds held by a title insurer, underwritten title company or
controlled escrow company before the conditions of the escrow
applicable to that disbursement have been met, or in a manner which
does not conform to Section 12413.1, including disbursing or offering
to disburse before the expiration of the appropriate period
established in Section 12413.1.
(6) Furnishing or offering to furnish all or any part of the time
or productive effort of any employee of the title insurer,
underwritten title company, or controlled escrow company to any
person for any service unrelated to the title business.
(7) Advertising or paying for the advertising in any newspaper,
newsletter, magazine, or publication that is produced by, or on
behalf of, a person, or that results in a direct, or indirect,
subsidy to a person.
(8) Expenditures for food, beverages, and entertainment for a
person.
(d) Expenditures for the following are not deemed to be unlawful
or in violation of this section:
(1) Promotional items with a permanently affixed company logo of
the underwritten title company, title insurer, or controlled escrow
company, with a value of not more than ten dollars ($10) each.
"Promotional item" does not include a gift certificate, gift card, or
other item that has a specific monetary value on its face, or that
may be exchanged for any other item having a specific monetary value.
(2) Furnishing education or educational materials exclusively
related to the business of title insurance for a person if continuing
education credits are not provided.
(3) Other expenditures for a person, as permitted by the
Department of Insurance by regulation.
(e) The provision or payment of any form of consideration as an
inducement for the placement or referral of title business not
specifically set forth in this section shall not be presumed lawful
merely because they are not specifically prohibited.
(f) The Insurance Commissioner may determine compliance and
enforce the provisions of this section by written order, regulation
or written consent which may take into consideration standards,
conditions, guidelines, principles, or definitions utilized by other
states or federal agencies but those standards, conditions,
guidelines, principles, or definitions shall not be determinative.
(g) It is the intent of the Legislature that the enactment of this
section shall have no effect on the applicability of other sections
of the Insurance Code that are in existence prior to the enactment of
this section and which specifically, or by implication, refer to
this section. The Legislature hereby intends that this section,
including the specific terms employed within it, shall be liberally
construed for the purpose of protecting consumers of title business.
12404.1. The furnishing of a preliminary report by any title
insurer, controlled escrow company or underwritten title company,
without charge to any person, shall constitute a violation of Section
12404. The charge for a preliminary report shall have a reasonable
relation to the cost of production of the report but in no event
shall it be less than the rate for a standard owners policy, minimum
liability, as set forth in the company's rate schedule. After billing
any person for a preliminary report the title insurer, controlled
escrow company or underwritten title company shall promptly make a
good faith attempt to collect; provided, however, that
notwithstanding Section 12404, but without limiting the applicability
of that section to other transactions, this charge may be waived or
canceled, if the company follows uniform practices as to all
customers under like circumstances.
(a) After the issuance of the preliminary report, but before the
charge is waived or canceled, the files of the issuing company
contain a copy of a bona fide sales or exchange agreement, or loan
commitment executed by the party or parties in interest relating to
the property described in the report, and the sale, exchange, or loan
is not consummated.
(b) When the preliminary report so furnished contains a lien or
encumbrance or other title defect which the issuing company has
refused to eliminate from its policy of title insurance or to provide
insurance against loss by reason thereof, and another title
insurance company has eliminated the lien or encumbrance or other
title defect from its policy of title insurance or provided insurance
against loss resulting therefrom within a reasonable period of time
from the date of the issuance of the preliminary report.
The furnishing of the names of owners of record, descriptions of
real property, and property characteristics, as defined in Section
408.3 of the Revenue and Taxation Code, shall not be deemed to be a
violation of Section 12404, whether provided on individual or
multiple properties and whether provided in printed form or by
electronic media.
12404.5. As used in this section "personal or controlled insurance"
means a policy of title insurance, or insurance as to the identity,
due execution and validity of any note or bond secured by mortage, or
the identity, due execution, validity and recording of any such
mortgage, or any other service afforded by title insurers the rate
for which is required to be filed by Article 5.5 (commencing with
Section 12401) of this chapter, where the insured or one of the
insured under such policy is, or the loss thereunder is payable to,
an underwritten title company, a controlled escrow company, or an
issuing agent, or
(a) If such underwritten or controlled company or issuing agent is
a natural person: (1) his spouse, his employer or his employer's
spouse, or (2) any person related to him or the persons mentioned in
(1) of this paragraph within the second degree by blood or marriage,
or (3) if his employer is a corporation, any person directly or
indirectly owning or controlling a majority of the voting stock or
controlling interest in such corporation, or (4) if his employer is a
partnership or association, any person owning any interest in such
partnership or association.
(b) If such underwritten or controlled company or issuing agent is
a corporation: (1) any person directly or indirectly owning or
controlling a majority of the voting stock or controlling interest in
such corporation, or (2) any corporation which is directly or
indirectly controlled by a person who also controls the underwritten
title company, controlled escrow company, or issuing agent, as
described in (1), or (3) any corporation making consolidated returns
for United States income tax purposes with any corporation described
in (1) or (2) of this paragraph.
If the fees and charges for personal or controlled insurance so
issued in any one calendar year received by an underwritten title
company, a controlled escrow company or an issuing agent exceed the
fees and charges received for other title insurance issued at the
instance or request of such underwritten title company, controlled
escrow company or issuing agent in the same year, the excess is an
unlawful rebate. Violation of this section by a title insurer shall
not be subject to the penalty provided for in Section 12409.
12405. No title insurer, no controlled escrow company, and no
underwritten title company shall make any rebate of any portion of
the fee or charge shown by the schedule required by Section 12401.1.
No title insurer, no controlled escrow company and no underwritten
title company shall quote any fee or make any charge for a title
policy to any person which is less than that currently available to
others for the same type of title policy in a like amount covering
property in the same county and involving the same factors as set
forth in its then currently effective schedule of fees and charges.
The amount by which any fee or charge is less than that called for by
the then currently effective schedule of fees and charges of the
title insurer is an unlawful rebate; provided, that nothing contained
in this article shall prohibit bulk rates or special rates for
customers of prescribed classes if such bulk or special rates are
provided for in such schedule.
12405.7. In addition to other acts prohibited by this article, no
controlled escrow company or title insurer or other person engaged in
the business of selling or furnishing to the public, directly or
indirectly, evidence to title to real property shall:
(a) Pay for or furnish or offer to pay for or furnish any part of
the advertising or promotional material of the customer in connection
with the sale or encumbrance of real property.
(b) Pay or offer to pay for any evidence of title or copy or
contents thereof not produced or issued by such person or company if
such evidence of title relates to a current real property
transaction, except as provided in Section 12412.
12406. No title insurer shall issue any title policy in any
transaction in connection with which it or any person which is a
controlled escrow company or underwritten title company by reason of
its relationship with such title insurer has paid or contemplates
paying any commission in violation of Section 12404 or in connection
with which it or any such controlled escrow company or underwritten
title company has made or contemplates making any unlawful rebate in
violation of Section 12405.
12406.5. (a) The commissioner shall develop, publish, and
disseminate a brochure for consumers who are required to buy title
insurance as part of a residential real estate transaction. The
brochure shall inform consumers that competing title insurers and
underwritten title companies may offer different costs or services
for the title insurance required in the transaction. The brochure
shall also inform consumers about the potential availability of
discounts in cases involving first-time buyers, short-term rates if a
home is resold in less than a five-year period, concurrent rates if
the company is providing both the homeowners' and the lenders' title
insurance policies in the transaction, subdivision bulk rates if the
property being purchased is in a new subdivision, refinancing
discounts, short-term financing rates, and discounts that may be
available in other special cases. The brochure shall encourage
consumers to contact more than one title insurer or underwritten
title company in order to compare costs and services.
(b) The brochure developed pursuant to subdivision (a) shall
include the department's toll-free consumer assistance telephone
number and shall invite consumers to call the department if they need
assistance.
(c) The department shall display the brochure developed pursuant
to subdivision (a) on its Internet website, and the brochure shall
include the department's Internet address.
(d) The brochure developed pursuant to subdivision (a) shall also
educate consumers about laws involving unlawful commissions and
rebates associated with the placement or referral of title insurance
and shall encourage consumers to report to the department, to the
Department of Real Estate, and to any other appropriate government
agencies any suspected incidents of probable unlawful commissions or
rebates subject to Article 6.5 (commencing with Section 12414).
(e) One copy of the brochure developed pursuant to this section
shall be made available to a member of the public at no cost, and the
department may charge its actual cost for providing additional
copies. The brochure shall be made available for reproduction at no
cost to any vendor who wishes to publish the brochure as written,
provided any vendor who wishes to publish the brochure agrees to
submit any documents containing the brochure to the department prior
to publication.
12407. The commissioner, if he has reason to believe that any
controlled escrow company or any underwritten title company has
violated or is violating any of the provisions of this article, has
the power and it is his duty to forthwith examine its books, records
and accounts and in making any such examination he has all the power
set forth in Article 4, Chapter 1 of Part 2 of Division 1 of this
code and any company so examined shall pay to the commissioner the
cost of such examination on demand. Whenever the commissioner
examines a title insurer, he shall make such examination of its
books, records, and files as may be necessary in his judgment to
determine whether or not it has violated or is violating any of the
provisions of this article.
12408. Every title insurer shall include in its annual statement
furnished the commissioner pursuant to Article 10 (commencing with
Section 900), Chapter 1, Part 2, Division 1 of this code, the name of
each person which is a controlled escrow company or underwritten
title company by reason of its relationship with such title insurer.
12408.1. Whenever a title insurer terminates its underwriting
agreement with any underwritten title company, it shall at the same
time give notice of the termination to the commissioner.
12408.5. (a) Notwithstanding any other provision of this article no
title insurer, no controlled escrow company, and no underwritten
title company shall pay any commission for the solicitation or
negotiation of any services constituting the business of title
insurance.
(b) The provisions of subdivision (a) notwithstanding, a title
insurer, controlled escrow company, or underwritten title company may
pay to full-time salaried employees a commission, incentive
compensation or bonuses based on any such employees' level of
production of any services constituting the business of title
insurance. Any title insurer, controlled escrow company, or
underwritten title company and, where applicable their affiliates,
which makes such payments shall maintain adequate records detailing
the conditions to receipt of any commission, incentive compensation
or bonus, the recipient thereof and the amount paid.
(c) Any employee of a title insurer, underwritten title company,
or controlled escrow company shall not, directly or indirectly, pay
or offer to pay, either directly or indirectly, any part of his or
her compensation, whether denominated salary, incentive compensation,
or bonuses to any person or entity defined in Section 12404, as an
inducement for, or as compensation for, any title insurance business
or any escrow or other title business, and any payment or offer to
pay this consideration is an unlawful rebate.
12409. (a) Every title insurer, controlled escrow company, and
underwritten title company which pays any commission or which makes
any unlawful rebate in violation of this article shall be liable to
the people of California for five times the amount of that commission
or unlawful rebate, the amount thereof to be recovered by the
commissioner pursuant to Section 12976. In addition to, or in lieu
of, any other penalty that may be imposed under this code, the
commissioner may, after a hearing, issue an order to restrict or
suspend the certificate of authority of any title insurer or
controlled escrow company or the license of any underwritten title
company. The commissioner may restrict or suspend the certificate of
authority or license on a statewide basis or in specified counties.
(b) In no event shall the total or aggregate amount recovered by
the commissioner from a title insurer, controlled escrow company, or
underwritten title company pursuant to this section be less than five
thousand dollars ($5,000).
12410. In enforcing any of the provisions of this article, the
commissioner shall be entitled to the remedies provided for in
Section 12928.6 of this code.
12411. The commissioner may after a hearing suspend or revoke the
certificate of authority of any title insurer or the license of any
underwritten title company licensed pursuant to the provisions of
Section 12389, which, after 10 days' written notice from the
commissioner requiring it to comply with the provisions of this
article willfully fails to do so.
12412. Nothing in this article prohibits the division of fees or
charges, for work and services actually performed, between title
insurers or between title insurers and underwritten title companies
or between underwritten title companies, if such division does not
constitute an unlawful rebate as defined by Section 12404.5, or is
prohibited by Section 12405.7 or 12408.5. The entire charge made to
obtain a title policy shall be set forth on the title policy.
12413.1. No title insurance company, controlled escrow company, or
underwritten title company shall disburse funds from an escrow
account until the day established by the following:
(a) Except for funds deposited by cash or by electronic payment,
deposits accorded next day availability pursuant to Part 229 of Title
12 of the Code of Federal Regulations may not be disbursed until the
business day following the business day of deposit.
(b) Except for drafts, deposits not accorded next day availability
pursuant to Part 229 of Title 12 of the Code of Federal Regulations
shall not be disbursed until the day on which these funds must be
made available to depositors under the federal regulation specified
in this subdivision.
(c) Funds deposited by cash or by electronic payment may be
disbursed following deposit on the same business day as the business
day of deposit.
(d) Notwithstanding the provisions of subdivision (b), deposits
other than drafts may be disbursed on the business day following the
business day of deposit if the financial institution to which the
funds have been deposited informs the title insurance company,
controlled escrow company, or underwritten title company in writing
that final settlement has occurred on the deposited item. For the
purposes of this subdivision, an electronically transmitted document
that specifies that final settlement has occurred constitutes written
notice as to an individual item.
(e) Where a draft, other than a share draft, has been received and
submitted for collection, no title insurance company, controlled
escrow company, or underwritten title company shall disburse funds
from an escrow account with respect to the draft until the proceeds
of the draft have become available for withdrawal from the financial
institution to which the draft has been submitted for collection. For
purposes of this subdivision, "available for withdrawal" means when
the draft has been submitted for collection and payment received.
Notwithstanding this subdivision, disbursement of funds represented
by share drafts shall be governed by subdivisions (b) and (d), if
applicable.
(f) For purposes of this section, "escrow account" means any
depository account with a financial institution to which funds are
deposited with respect to any transaction wherein one person, for the
purpose of effecting the sale, transfer, encumbering or leasing of
real or personal property to another person, delivers any written
instrument, money, evidence of title to real or personal property, or
other thing of value to a third person to be held by that third
person until the happening of a specified event or the performance of
a prescribed condition, when it is then to be delivered by that
third person to a grantee, grantor, promisee, promisor, obligee,
obligor, bailee, bailor, or any agency or employee of the latter.
(g) Except as provided in subdivision (h), for purposes of this
section, any word or term used herein or relevant to interpretation
of this section, including, but not limited to, "available for
withdrawal," "check," "electronic payment," and "business day," which
is defined in Part 229 of Title 12 of the Code of Federal
Regulations on January 1, 1990, shall have the meaning there given as
the regulations existed on January 1, 1990.
(h) For purposes of this section, "financial institution" means
any financial institution specified in Section 12413.5.
(i) No title insurance company, controlled escrow company, or
underwritten title company shall be liable for a violation of this
section if the violation was not intentional or resulted from a bona
fide error notwithstanding the maintenance of procedures reasonably
adapted to avoid that error. Examples of bona fide errors include,
but are not limited to, clerical, calculation, computer malfunction
and programming, and printing errors.
(j) Nothing in this section shall be deemed to prohibit the
recordation of documents prior to the time funds are available for
disbursement with respect to a transaction provided the parties to
the transaction consent in writing prior thereto.
(k) Nothing in this section is intended to amend, alter, or
supersede other sections of this code, or other laws of this state or
the United States, regarding an escrow holder's duties and
obligations.
12413.2. Any item or draft received by a title insurance company,
controlled escrow company, or underwritten title company in
connection with any escrow shall be deposited in, or submitted for
collection to, a financial institution as defined in Section 12413 no
later than the close of the next business day following receipt.
For purposes of this section, "item" means any check, including a
cashier's check, negotiable order of withdrawal, share draft,
traveler's check, or money order.
12413.5. All funds received in connection with any escrow conducted
by a title insurance company, controlled escrow company, or
underwritten title company shall be deposited in a separate
depository account in a bank or savings and loan association or in an
account in an industrial loan company insured by the Federal Deposit
Insurance Corporation, and the funds so deposited shall be the
property of the person or persons entitled thereto under the
provisions of the escrow and segregated escrow by escrow in the
records of the title insurance company, controlled escrow company, or
underwritten title company. The funds shall not be subject to any
debts of the title insurance company, controlled escrow company, or
underwritten title company and shall be used only to fulfill the
terms of the individual escrow for which the funds were accepted and
none of the funds shall be utilized until the conditions of the
escrow have been met.
Any interest received on funds deposited in connection with any
escrow which are deposited in a bank, savings and loan association,
or industrial loan company shall be paid over by the escrow to the
depositing party to the escrow unless the escrow is otherwise
instructed by the depositing party, and shall not be transferred to
the account of the title insurance company, controlled escrow
company, or underwritten title company.
