SB 0355 Revises the Missouri Title Insurance Act
LR Number:L1640.01I Fiscal Note:1640-01
Committee:Insurance and Housing
Last Action:02/02/99 - Referred S Insurance & Housing Committee Journal page:S170
Effective Date:January 1, 2000
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Current Bill Summary

SB 355 - This act repeals the current "Missouri Title Insurance Act" in its entirety. No title insurance policy may be issued before the title insurer does a title search from the evidence prepared from a title plant. If no title plant exists in the county, the policy of insurance shall be based upon the best title evidence available. Attorneys who are licensed as title insurance agents may upon personal inspection use the best evidence available in the county.

This act requires a statement notifying the owner of exceptions when a title insurance commitment includes an offer to issue an owner's policy covering the resale of owner-occupied residential property. A lender's title insurance policy issued in conjunction with a mortgage loan shall give notice to the purchaser that the lender's policy protects the lender and does not protect the purchaser and that the purchaser could be protected through the purchase of an owner's policy of title insurance.

A title insurer shall not allow its agents to sell title insurance policies unless there is a written contract between the agent and the insurer. Each title insurer shall maintain a statement of the agent's financial condition of the previous calendar year on file. The title insurer must conduct a review of the agent's underwriting, claims and escrow practices. If an agent does not maintain a separate bank or trust account for each insurer that he or she represents, the title insurer shall verify that the funds held on its behalf are reasonably ascertainable from the books of account and records of the agent. If a title insurer terminates a contract with an agent, it must provide notice of the termination to the Director of the Department of Insurance. The title insurer must maintain records that its title insurance agents are licensed in the state of Missouri.

In order for a title insurer or title agent to operate as an escrow, security, settlement, or closing agent, it must deposit such related funds into a separate fiduciary trust account. Such funds are the property of the person entitled to them under the provisions of the escrow, settlement, security agreement or closing agreement. The funds shall be disbursed only pursuant to a written instruction specifying how the funds may be disbursed. Interest received on escrow, settlement, security deposit, or closing funds may be retained by the title insurer or agent as compensation for the administration of the account. Title insurance agents shall cooperate with its underwriters when reviewing the accounts. The title insurer shall provide a copy of the report of the review to the Director of Insurance.

A title insurer or agent shall not receive any consideration for the referral of title insurance business. Another title insurer or title agent doing business in the same county may bring a cause of action against the title insurer who is referring business for consideration.

No title insurer or agent shall participate in any transaction in which it knows the other party requires that a party obtain a title insurance policy from a particular insurer or agent.

No title insurer may charge rates except in accordance with the premium rate schedule and manual filed with the Director of Insurance. The Director may establish rules for the reporting of revenue and loss experience in order to establish rates and fees. The Director may have an audit conducted to verify the information. Information relating to the experience of a particular title agent shall be kept confidential unless the Director finds it in the public interest to disclose the information.

No title insurer or agent shall knowingly withhold information from, or give false information to the Director regarding information which will affect the rates established by this act.

Evidence of the examination of title and the determination of insurability shall be preserved for a minimum of 15 years after the title insurance policy has been issued. Records relating to escrow and security deposits shall be preserved for a minimum of five years after the account has been closed.

If the Director of Insurance determines that a title insurer or other person has violated this act, the Director may assess a monetary penalty and/or revoke or suspend the title insurer's license.

The Director of Insurance or Attorney General may bring an action to enjoin violations of the Real Estate Settlement Procedures Act.

No person other than a domestic, foreign or non-U.S. title insurer licensed by the Director of Insurance shall transact title insurance business in Missouri.

Title insurers shall have the power to transact title insurance business, reinsure title insurance policies, and perform ancillary activities related to the issuance of a title insurance policy.

No insurer that transacts other types of businesses other title insurance shall be eligible for the issuance or renewal of title insurance license. Title insurance shall not be transacted, underwritten, or issued by any insurer transacting other types of business. A title insurer shall not engage in the business of guaranteeing payment of principal or the interest of bonds or mortgages. A title insurer may issue closing or settlement protection to a proposed insured if requested. The settlement protection may indemnify a proposed insured against the loss of settlement funds.

A title insurer must establish and maintain a minimum paid- in capital of not less than $400,000 and a paid-in initial surplus of at least $400,000 before becoming licensed in this state.

The title insurer's net retained liability for a single risk shall not exceed the aggregate of 50% of the surplus as it regards policyholders plus the statutory premium reserve less the company's investment in title plants. A single risk is the insured amount of any title insurance policy. Where there are two or more policies which are issued simultaneously covering different estates in the same real property, a single risk shall be the sum of the insured amounts of all the policies.

In determining the financial condition of a title insurer, the general provisions of sections 376.300 to 376.305 shall apply except than an investment in title plants equal to an amount to the actual cost shall be allowed as an admitted asset for title insurers. In determining the financial condition of a title insurer, the insurer shall establish and maintain: 1) a known claim reserve to cover all unpaid losses for which the title insurer may be liable under the title insurance policies; 2) a statutory or unearned premium reserve for the protection of title insurance policy holders.

The Missouri Uniform Insurers Liquidation Act shall apply to all title insurers. Security and escrow funds held by title insurers shall not become general assets and shall be administered as secure claims. Title insurance policies shall not be canceled during a period of liquidation unless good cause is shown to the court. Premiums paid, due or to become due under a title insurance policy at the date of order of insolvency shall be fully earned and it is the duty of title insurer or its agents to pay the premiums to the liquidator.

A title insurer shall only declare or distribute dividends to its shareholders with the approval of the Director of Insurance.

Title insurance forms shall be approved by the Director of Insurance before they are issued.

A title insurer may satisfy its obligation to file premium rates, rating manuals, and forms by becoming a member of a rate service organization. That organization may make the title insurer's required filings.

Title insurers shall propose premium rates that are not excessive nor inadequate for the safety and soundness of the title insurer. If the Director finds that the premium rates filed by the title insurer are not unreasonably high or unfairly discriminatory, the Director shall approve the rates. Before issuing an order of disapproval, the Director shall hold a hearing to review the premium rates filed by the title insurer.

A corporation, an unincorporated association, partnership, or an individual may apply to the Director for a license as a rating organization for title insurance companies. The Director shall issue the applicant a license authorizing it to act as a rating organization if the Director finds that the applicant is qualified. The licenses to act as a rating organization shall be valid for 3 years. The fee for such a license shall cost $5,000.

Every subscriber to a title insurance rating organization shall adhere to the filings made on its behalf by such organization. Any subscriber to a title insurance rating organization may appeal to the Director from decisions of the rating organization.

The premium income received by a title insurer shall mean the amount of premium actually remitted to the insurer and shall not include any amount of the premium retained by the title agent. This is for purposes of determining premium taxes imposed by Sections 148.320 and 148.340, RSMo.

Title insurance agents must be licensed. Employees of the title insurance agent shall either be licensed themselves or be named on the title insurance agent's license if they engage in the functions of a title insurance agent. Title insurance agents must eliminate the word insurer or underwriter from their business name unless the word "agency" is part of the name. If the title insurance agent delegates a title search to a third party, the agent must obtain proof that the third party is qualified by the rules and regulations established by the Director of Insurance.

Title insurance agents shall take 8 hours of continuing courses of education related to insurance every two years. For good cause, an agent may be granted an extended period of time to complete the educational requirements. Those title agents who reside in a state with mandatory continuing education requirements do not have to comply with this portion of the act.

The Director may audit and inspect and title insurance agent's books and records.

This act becomes effective January 1, 2000.