BILL NUMBER: SB 133 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY AUGUST 8, 2008
AMENDED IN ASSEMBLY JULY 11, 2007
AMENDED IN ASSEMBLY JUNE 28, 2007
AMENDED IN SENATE APRIL 23, 2007
INTRODUCED BY Senator Aanestad
( Coauthors:
Senators Cogdill,
Cox, and Wiggins
)
(Coauthor: Assembly Member Berg Galgiani
)
JANUARY 24, 2007
An act to amend Section 12404 of, and to add Article 8 (commencing
with Section 12418) to Chapter 1 of Part 6 of, Division 2
of of Division 2 of, the Insurance Code, relating
to insurance.
LEGISLATIVE COUNSEL'S DIGEST
SB 133, as amended, Aanestad. Title insurance: title solicitors.
The Insurance Commissioner generally regulates insurance,
including title insurance. Violation of certain of these provisions
is a misdemeanor.
This bill would prohibit a person from marketing title
insurance being employed as a title marketing
representative unless he or she holds a valid certificate of
registration as a title marketing representative issued by the
commissioner for a 5-year 3-year
period. This bill would exempt specified activities
from its scope. Violation of these provisions would be a
misdemeanor, pursuant to provisions of existing law.
By expanding the scope of an existing crime, this bill would
impose a state-mandated local program.
This bill would define "title marketing representative" and
provide that this does not include a person whose primary duties
directly involve the creation, production, or issuance of the title
policy or the performance of escrow services.
This bill would provide that if a person markets title insurance
without a valid certificate, as defined, the commissioner may issue a
cease and desist order prohibiting that person from further
marketing. This bill would require title companies to notify the
commissioner when a title marketing representative is
terminated or employed, as specified.
This bill would specify the information that the applicant for a
certificate must supply in writing under penalty of perjury to the
commissioner.
By expanding the scope of an existing crime, this bill would
impose a state-mandated local program.
This bill would provide a process and set a fee for
certificate renewal specify an application process for
the certificate of registration and provide that the commissioner
shall set a fee to obtain or renew a certificate in an amount
sufficient to defray the actual costs of processing the
application .
This bill would provide that the department
Department of Insurance may revoke, suspend, restrict, or
decline to issue a certificate of registration if it determines,
after a hearing, that the title marketing representative has
committed specified acts. The bill specifies other remedies available
to the commissioner for misconduct.
The bill would require the commissioner to issue and adopt rules
and regulations, as necessary, to administer the title marketing
representative program and would provide that bill would not become
effective until any regulations adopted are approved by the Office of
Administrative Law.
The bill would make a technical change by deleting an obsolete
statutory cross-reference.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 12404 of the Insurance Code is amended to read:
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.
(1)
(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.
(2)
(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.
(3) "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.
(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.
(d) Reasonable expenditures for food, beverages, entertainment,
educational programs, and promotional items constituting ordinary
business expenses are deemed not to constitute an inducement for the
placement or referral of title business, if the expenditures are
correctly reported and properly substantiated as an ordinary and
necessary business expense under provisions of the Internal Revenue
Code and regulations issued thereunder, and the expenditures do not
violate any other section of law, including, but not limited to,
Section 10177.4 of the Business and Professions Code.
(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.
SEC. 2. Article 8 (commencing with Section 12418) is added to
Chapter 1 of Part 6 of Division 2 of the Insurance Code, to read:
Article 8. Title Insurance Representatives
12418. (a) No person shall market title insurance
be employed as a title marketing representative
in this state unless the person holds a valid "certificate of
registration" as a title marketing representative issued by the
commissioner pursuant to Section 12418.1.
(b) For purposes of this article, "title marketing representative"
means a natural person employed by a title insurer, underwritten
title company, or controlled escrow company whose primary duty is to
market , offer, solicit, negotiate, or sell
title insurance , as defined in Section 12340.1
and receives compensation through bonuses or commission based on the
percentage or amount of title insurance policies or escrow services
sold through his or her marketing efforts . A title
marketing representative does not include a person whose primary
duties directly involve the creation, production, or issuance of the
title policy or the performance of escrow services.
(c) If any person knowingly markets title insurance without having
applied for or obtained a certificate of registration pursuant to
Section 12418.1, the commissioner may issue a cease and desist order
pursuant to Section 12921.8.
12418.1. (a) A certificate of registration as a title marketing
representative shall be applied for and renewed by filing with the
commissioner a written application. The application shall be on a
form prescribed by the commissioner, and shall prescribe the
disclosure of information that will aid the commissioner in
determining whether the prerequisites for the certificate have been
met. The applicant shall certify that the contents of the application
are true and correct under penalty of perjury.
(b) Each application for a certificate of registration shall
contain the following information:
(1) The residence address, the principal business address, and the
mailing address of the applicant.
(2) A statement, signed by an officer of the business by whom the
applicant is or will be employed, certifying that the applicant will
be provided training regarding Article 6 (commencing with Section
12404) within six months 60 days of the
hiring date or date of application.
(3) A statement, signed by the applicant, as to whether he or she
has previously had a certificate of registration revoked, suspended,
or otherwise limited under Section 12418.4.
(c) Each application to obtain or renew a certificate of
registration shall be accompanied by a filing fee of ____
dollars ($____). in an amount determined by the
department to be sufficient to defray the department's actual costs
of processing the application, not to exceed two hundred dollars
($200). An application shall not be deemed filed unless it has
been delivered to the department accompanied by the proper filing
fee.
(d) The commissioner may decline to act on an incomplete or
defective application until an amended application that completes the
prescribed form has been filed with the department. In the event
that the application is found to be defective or incomplete, the
department shall notify the applicant and his or her employer in
writing that the application needs to be modified and resubmitted
within 15 days of receipt of this written notification.
(e) An applicant submitting an application filed with the
department for a certificate of registration as a title marketing
representative may solicit, sell, or market title insurance, as
defined in Section 12340.1, in the interim time period preceding the
formal approval or rejection of the application , but shall be
subject to the same compliance requirements as a holder of an
approved certificate of registration. An applicant with a pending
application shall be deemed to be operating on a provisional basis
.
(f) In the event that the title marketing representative's
employment with a title company is terminated, the title company
formerly employing the title marketing representative shall notify
the department within 30 days of the termination. If the title
marketing representative becomes employed by another title company as
a title marketing representative, the new employer shall notify the
department of the title marketing representative's new employment
within 30 days of the commencement of that employment.
(g) An applicant who has previously had a certificate of
registration revoked, suspended, or otherwise limited under
subdivision (d) of Section 12418.4 may not sell, solicit, or market
title insurance during the interim period described in subdivision
(e).
12418.2. (a) An applicant or holder of a certificate of
registration as a title marketing representative is not required to
pass a qualifying examination, and is exempt from prelicensing and
continuing education requirements, except as specified in paragraph
(2) of subdivision (b) of Section 12418.1.
(b) Upon the filing of an application for the issuance or renewal
of a certificate of registration, the commissioner may conduct an
investigation , during the interim period set forth in
subdivision (e) of Section 12418.1, to determine if the
applicant shall be granted the certificate of registration by virtue
of prior conduct in the marketing of policies of title insurance and
to verify the accuracy of the information submitted by the applicant
to the Department of Insurance department
and may require the filing of any supplementary documents,
affidavits, and statements that may be necessary to determine whether
training specified in paragraph (2) of subdivision (b) of Section
12418.1 has been, or will be, provided to the applicant within the
time period set forth in Section 12418.1. Should the commissioner
decline to approve the granting of a certificate of registration, the
procedure set forth in subdivision (c) of Section 12418.4 shall
apply.
12418.3. (a) Each certificate of registration issued under this
article shall be for a five-year three-year
period beginning on the date the certificate is issued.
(b) Not less than 60 days before a certificate of registration
will expire, the commissioner shall mail an application to renew the
certificate to the last known address appearing on the registrant's
records. It shall be the responsibility of the registrant to renew
his or her certificate, whether or not a renewal notice is received.
(c) The application for renewal of an expired certificate of
registration may be filed after the expiration date and until the
same month and day of the next succeeding year. In addition to the
fee for a renewal application, a delinquent application fee in the
amount of fifty dollars ($50) shall be assessed for each application
for renewal filed after the expiration date. Each registrant shall be
subject to payment of delinquent application fees under this
subdivision. The commissioner may waive the delinquent application
fee, or accept a renewal filed after the date specified in this
subdivision, if the registrant's failure to comply is due to clerical
or other inadvertent error on the part of the department.
12418.4. (a) The provisions set forth in Sections 1667,
1668, 1669, 1670, 1738, 1738.5, 1743, and in Article 6
(commencing with Section 12404), shall apply to all applicants or
holders of a certificate of registration issued pursuant to this
article.
(b) The department may revoke, suspend, restrict, or decline to
issue a certificate of registration if it determines that the title
marketing representative or applicant has violated
provisions of Article 6 (commencing with Section 12404) pursuant to
the due process and hearing requirements set forth in subdivision
(c).
(c) Except as provided in Section 1669, a certificate of
registration shall not fail to be issued, be
denied, restricted, suspended, or revoked without a hearing
conducted in accordance with Chapter 5 (commencing with Section
11500) of Part 1 of Division 3 of Title 2 of the Government Code.
(d) In addition to, or in lieu of, any other penalty that may be
imposed under this article against a title marketing representative,
the commissioner may bring an administrative action
against a title marketing representative for any violation of the
provisions of Article 6 (commencing with Section 12404). If a title
marketing representative charged with a violation of Article 6
(commencing with Section 12404) is determined by the commissioner to
have committed the violation, the commissioner may require the
surrender of, temporarily suspend or revoke either permanently or
temporarily the title marketing representative's certificate of
registration, and, in addition, may impose a monetary penalty. Any
payment of a monetary penalty pursuant to a settlement or final
adjudication shall be made from the title marketing representative's
personal funds and not by his or her employer either directly or
through the title marketing representative. This article shall not
preclude an action against a company that had actual knowledge of the
violation by the title marketing representative. A title
marketing representative who is issued a certificate of registration
under this article may not engage in any activity that is otherwise
prohibited through a separate entity controlled by the title
marketing representative or by the company or entity that employs him
or her.
(e) A title marketing representative who has his or her
certificate of registration revoked by the department shall not be
permitted to reapply for another certificate of registration with the
department for five years from the date of revocation.
12418.5. (a) The commissioner shall issue rules and regulations,
as necessary, to administer the program established by this article.
(b) The commissioner shall adopt regulations to define reasonable
expenditures for title marketing representatives pursuant to
subdivision (d) of Section 12404.
12418.6. The registration and enforcement provisions of this
article shall become operative on the date that the regulations
adopted pursuant to subdivision (b) of Section 12418.5 have been
approved by the Office of Administrative Law.
SEC. 3. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.