BILL NUMBER: AB 704 AMENDED
BILL TEXT
AMENDED IN SENATE JUNE 15, 2015
AMENDED IN ASSEMBLY APRIL 6, 2015
INTRODUCED BY Assembly Member Cooley
FEBRUARY 25, 2015
An act to amend Section 12340.3 of, to amend,
repeal, and add Section 12389 of, and to add Sections
12340.12 and Section 12340.13 to, the Insurance
Code, relating to escrow.
LEGISLATIVE COUNSEL'S DIGEST
AB 704, as amended, Cooley. Escrow services: authorization to
transact business.
Existing law provides for the regulation of title insurers and
underwritten title companies by the Insurance Commissioner. Existing
law, the Escrow Law, defines escrow agents and regulates their
activities. Existing law defines escrow as a transaction in which one
person, for the purpose of effecting a sale or transfer to another,
delivers a thing of value to a 3rd person to be held by that person
until the happening of a specified event or the performance of a
prescribed condition, when it is then to be delivered.
This bill would define "escrow" as it relates to transactions
regarding the sale, transfer, encumbrance, or lease of real or
personal property, as the delivery of a thing of value to an insurer,
underwritten title company, or controlled escrow company, to be held
by that entity until the happening of a specified event or the
performance of a prescribed condition, when that thing is then to be
delivered to another specified person.
Existing law authorizes an underwritten title company to engage in
the escrow business and to act as an escrow agent if the company
satisfies specified requirements, including maintenance of specified
records, and the deposit of a specified sum of money with the
commissioner. Existing law specifies the conditions under which the
commissioner may release or return those deposits to the company.
This bill would expand the requirements for a company to be
authorized to conduct escrow services, to engage in the escrow
business, and to act as an escrow agent. This
The bill would authorize a company that is a stock corporation
to conduct escrow services through a business location, as defined,
if the company receives approval of its name from the commissioner,
maintains a minimum net worth, obtains a license to transact its
business from the commissioner, and furnishes audits to the
commissioner, as specified. This The
bill would require a company, on and after July 1, 2016, as a
condition of engaging in the escrow business or acting as an escrow
agent, to maintain a bond in a specified amount based on its
annual trust fund obligations. This of $50,000. The
bill would authorize a company to, with the approval of the
commissioner, make a cash deposit or obtain an
irrevocable letter of credit in lieu of that bond. This
The bill would specify conditions for the
issuance of that bond or letters of credit or use of that cash
deposit. This The bill would require
the commissioner to promptly release all escrow-related
deposits made with the commissioner before July 1, 2016, under
specified conditions, including the deposit of the bond, letter of
credit, or cash deposit described above.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 12340.3 of the Insurance
Code is amended to read:
12340.3. "Business of title insurance" includes:
(a) Issuing or proposing to issue any title policy as insurer,
guarantor, or indemnitor;
(b) Transacting or proposing to transact any phase of title
insurance, including solicitation, negotiation preliminary to
execution, or execution of a title policy, insuring and transacting
matters subsequent to the execution of a title policy and arising out
of such policy, excluding reinsurance;
(c) The performance by a title insurer, an underwritten title
company or a controlled escrow company of any service in conjunction
with the issuance or contemplated issuance of a title policy.
(d) The handling of any escrow, settlement, or closing.
(e) The doing of or proposing to do any business which is in
substance the equivalent of any of the items listed in subdivisions
(a) to (d), inclusive.
(f) The issuance, by a title insurer, of a letter of indemnity.
Any such letter of indemnity shall be limited to and issued solely
for the purpose of indemnifying the commissioner on behalf of any
member of the public who transacts an escrow with an underwritten
title company, with whom the title insurer has an underwriting
agreement. A title insurer may charge a reasonable fee in connection
with the issuance of any such letter. No rate or form filing shall be
required with respect to any such letter of indemnity.
(g) The act of an insurer in furnishing in writing to a
prospective purchaser of the insurer's title policy a statement which
assures, and assumes the liability for, the proper performance of
services necessary to the conduct of a real estate closing performed
by an underwritten title company with whom the insurer maintains an
underwriting agreement. A title insurer may charge a reasonable fee
in connection with the furnishing of any such statement. No rate or
form filing shall be required with respect to any such statement.
SEC. 2. Section 12340.12 is added to the
Insurance Code, to read:
12340.12. "Escrow" means any transaction in which a person, for
the purposes of effecting the sale, transfer, encumbrance, or lease
of real or personal property, regardless of the location of the real
or personal property, delivers a written instrument, money, evidence
of title to real or personal property, or other thing of value to an
insurer, underwritten title company, or controlled escrow company, to
be held by that insurer, underwritten title company, or controlled
escrow company until the happening of a specified event or the
performance of a prescribed condition, when it is then to be
delivered by that insurer, underwritten title company, or controlled
escrow company to a grantee, grantor, promisee, promisor, obligee,
obligor, or any agent or employee of any of the latter.
SEC. 3. SECTION 1. Section 12340.13
is added to the Insurance Code, to read:
12340.13. "Business location" means a facility or other place of
business in this state where an underwritten title company
or controlled escrow company engages in the business of
receiving an escrow for deposit or delivery.
conducting escrow services.
SEC. 4. SEC. 2. Section 12389 of the
Insurance Code is amended to read:
12389. (a) An underwritten title company as defined in Section
12340.5, which shall be a stock corporation, may
may, subject to subdivision (b), (1) engage in the
business of preparing title searches, title reports, title
examinations, or certificates or abstracts of title, upon the basis
of which a title insurer writes title policies, and
conducting (2) conduct escrow services
through at business locations, as defined in
Section 12340.13, in counties in which the underwritten title company
is licensed to transact business, provided that:
conduct escrow services regardless of the location of the real
or personal property involved in the transaction.
(1)
(b) (1) Only domestic
corporations may be licensed under this section and no underwritten
title company, as defined in Section 12340.5, shall become licensed
under this section, or change the name under which it is licensed or
operates, unless it has first complied with Section 881.
(2) (A) Depending upon the county or counties in which the company
is licensed to transact business, it shall maintain required minimum
net worth as follows:
Aggregate number of
documents
recorded and documents
filed in the
offices of the county
recorders in the
preceding calendar year in
all counties
where the company is
licensed to transact
business.
Amount of
required
Number of documents minimum net worth
Less than 50,000 .............. $ 75,000
50,000 to 100,000 ............. 120,000
100,000 to 500,000 ............ 200,000
500,000 to 1,000,000 .......... 300,000
1,000,000 or more ............. 400,000
(B) "Net worth" is defined as the excess of assets over all
liabilities and required reserves. It may carry as an asset the
actual cost of its title plant, provided the value ascribed to that
asset shall not exceed the aggregate value of all other assets.
(C) If a title plant of an underwritten title company is not being
currently maintained, the asset value of the plant shall not exceed
its asset value as determined in the preceding paragraph as of the
date to which that plant is currently maintained, less one-tenth
thereof for each succeeding year or part of the succeeding year that
the plant is not being currently maintained. For the purposes of this
section, a title plant shall be deemed currently maintained so long
as it is used in the normal conduct of the business of title
insurance, and (i) the owner of the plant continues regularly to
obtain and index title record data to the plant or to a continuation
thereof in a format other than that previously used, including, but
not limited to, computerization of the data, or (ii) the owner of the
plant is a participant, in an arrangement for joint use of a title
plant system regularly maintained in any format, provided the owner
is contractually entitled to receive a copy of the title record data
contained in the jointly used title plant system during the period of
the owner's participation therein, either periodically or upon
termination of that participation, at a cost not to exceed the actual
cost of duplication of the title record data.
(D) An underwritten title company at all times shall maintain
current assets of at least ten thousand dollars ($10,000) in excess
of its current liabilities, as current assets and liabilities may be
defined pursuant to regulations made by the commissioner. In making
the regulations, the commissioner shall be guided by generally
accepted accounting principles followed by certified public
accountants in this state.
(3) (A) An underwritten title company shall obtain from the
commissioner a license to transact its business. The license shall
not be granted until the applicant conforms to the requirements of
this section and all other provisions of this code specifically
applicable to the applicant. After issuance the holder
shall continue to comply with the requirements as to its business set
forth in this code, in the applicable rules and regulations of the
commissioner and in the laws of this state.
(B) An underwritten title company that possesses, or is required
to possess, a license pursuant to this section is subject as if an
insurer to the provisions of Article 8 (commencing with Section 820)
of Chapter 1 of Part 2 of Division 1 of this code and is deemed to be
subject to authorization by the Insurance Commissioner within the
meaning of subdivision (e) of Section 25100 of the Corporations Code.
(C) The license may be obtained by filing an application on a form
prescribed by the commissioner accompanied by a filing fee of three
hundred fifty-four dollars ($354). The license when issued shall be
for an indefinite term and shall expire with the termination of the
existence of the holder, subject to the annual renewal fee imposed
under Sections 12415 and 12416.
(D) An underwritten title company seeking to extend its license to
an additional county shall pay a two-hundred-seven-dollar ($207) fee
for each additional county, and shall furnish to the commissioner
evidence, at least sufficient to meet the minimum net worth
requirements of paragraph (2), of its financial ability to expand its
business operation to include the additional county or counties.
(4) (A) An underwritten title company shall furnish an audit to
the commissioner on the forms provided by the commissioner annually,
either on a calendar year basis on or before March 31 or, if approved
in writing by the commissioner in respect to any individual company,
on a fiscal year basis on or before 90 days after the end of the
fiscal year. The time for furnishing any audit required by this
paragraph may be extended, for good cause shown, on written approval
of the commissioner for a period, not to exceed 60 days. Failure to
submit an audit on time, or within the extended time that the
commissioner may grant, shall be grounds for an order by the
commissioner to accept no new business pursuant to subdivision (d).
The audits shall be private, except that a synopsis of the balance
sheet on a form prescribed by the commissioner may be made available
to the public.
(B) The audits shall be made in accordance with generally accepted
auditing standards by an independent certified public accountant or
independent licensed public accountant whose certification or license
is in good standing at the time of the preparation. The fee for
filing the audit shall be three hundred thirteen dollars ($313).
(C) The commissioner may refuse to accept an audit or order a new
audit for any of the following reasons:
(i) An adverse result in any proceeding before the California
Board of Accountancy affecting the auditor's license.
(ii) The auditor has an affiliation with the underwritten title
company, or any of its officers or directors, that would prevent his
or her reports on the company from being reasonably objective.
(iii) The auditor has suffered conviction of a misdemeanor or
felony based on his or her activities as an accountant.
(iv) A judgment adverse to the auditor in any civil action finding
him or her guilty of fraud, deceit, or misrepresentation in the
practice of his or her profession.
(D) A company that fails to file any audit or other report on or
before the date it is due shall pay to the commissioner a penalty fee
of one hundred eighteen dollars ($118) and on failure to pay that or
another fee or file the audit required by this section shall forfeit
the privilege of accepting new business until the delinquency is
corrected.
(b)
(c) An underwritten title company may engage in the
escrow business and act as escrow agent provided that:
(1) The company maintains a record of all receipts and
disbursements of escrow funds.
(2) (A) The company deposits seven thousand five hundred dollars
($7,500) for each county in which it transacts business in some form
permitted by Section 12351 with the commissioner who shall
immediately make a special deposit of that amount in the State
Treasury and that deposit shall be subject to Sections 12353, 12356,
12357, and 12358 and, as long as there are no claims against the
deposit, all interest and dividends thereon shall be paid to the
depositor. The deposit shall be for the security and protection of
persons having lawful claims against the depositor growing out of
escrow transactions with it. The deposit shall be maintained until
four years after all escrows handled by the depositor have been
closed.
(B) The commissioner may release the deposits prior to the passage
of the four-year period upon presentation of evidence satisfactory
to the commissioner of either a statutory merger of the depositor
into a licensee or certificate holder subject to the jurisdiction of
the commissioner, or a valid assumption agreement under which all
liability of the depositor stemming from escrow transactions handled
by it is assumed by a licensee or certificate holder subject to the
jurisdiction of the commissioner.
(C) With the foregoing exceptions, the deposit shall be returned
to the depositor or lawful successor in interest following the
four-year period, upon presentation of evidence satisfactory to the
commissioner that there are no claims against the deposit stemming
from escrow transactions handled by the depositor. If the
commissioner has evidence of one or more claims against the
depositor, and the depositor is not in conservatorship or
liquidation, the commissioner may interplead the deposit by special
endorsement to a court of competent jurisdiction for distribution on
the basis that claims against the depositor stemming from escrow
transactions handled by it have priority in the distribution over
other claims against the depositor.
(c)
(d) The commissioner shall, whenever it appears
necessary, examine the business and affairs of a company licensed
under this section. The examination shall be at the expense of the
company.
(d)
(e) (1) If the commissioner determines, after notice
and hearing, that a company licensed under this section has willfully
failed to comply with a provision of this section, the commissioner
shall make his or her order prohibiting the company from conducting
its business for a period of not more than one year.
(2) A company violating the commissioner's order is subject to
seizure under Article 14 (commencing with Section 1010) of Chapter 1
of Part 2 of Division 1, is guilty of a misdemeanor, and may have the
license revoked by the commissioner. Any person aiding and abetting
any company in a violation of the commissioner's order is guilty of a
misdemeanor.
(e)
(f) The purpose of this section is to maintain the
solvency of the companies subject to this section and to protect the
public by preventing fraud and requiring fair dealing. In order to
carry out these purposes, the commissioner may make reasonable rules
and regulations to govern the conduct of its business of companies
subject to this section. The rules and regulations shall be adopted,
amended, or repealed in accordance with the procedure provided in
Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3
of Title 2 of the Government Code.
(f)
(g) The name under which each underwritten title
company is licensed shall at all times be an approved name. The fee
for filing an application for a change of name shall be one hundred
eighteen dollars ($118). Each such company shall be subject to the
provisions of Article 14 (commencing with Section 1010) and Article
14.5 (commencing with Section 1065.1) of Chapter 1 of Part 2 of
Division 1.
(g)
(h) This section is repealed as of July 1, 2016.
SEC. 5. SEC. 3. Section 12389 is
added to the Insurance Code, to read:
12389. (a) On and after July 1, 2016, an underwritten title
company as defined in Section 12340.5 that is a stock corporation
may may, subject to subdivision (b), (1)
engage in the business of preparing title searches, title
reports, title examinations, or certificates or abstracts of title,
upon the basis of which a title insurer writes title policies, and
conducting (2) conduct escrow services
through business locations, as defined in Section 12340.13, in
counties in which the underwritten title company is licensed to
transact business, provided that: conduct
escrow services regardless of the location of the real or personal
property involved in the transaction.
(1)
(b) (1) Only a domestic
corporation may be licensed under this section and no underwritten
title company, as defined in Section 12340.5, may become licensed
under this section, or change the name under which it is licensed or
operates, unless it has first complied with Section 881.
(2) (A) Depending upon the county or counties in which the company
is licensed to transact business, it shall maintain required minimum
net worth as follows:
Aggregate number of
documents
recorded and documents
filed in the
offices of the county
recorders in the
preceding calendar year in
all counties
where the company is
licensed to transact
business.
Amount of
required
Number of documents minimum net worth
Less than 50,000 .............. $ 75,000
50,000 to 100,000 ............. 120,000
100,000 to 500,000 ............ 200,000
500,000 to 1,000,000 .......... 300,000
1,000,000 or more ............. 400,000
(B) "Net worth" for the purposes of this section is defined as the
excess of assets over all liabilities and required reserves. The
company may carry as an asset the actual cost of its title plant,
provided the value ascribed to that asset shall not exceed the
aggregate value of all other assets.
(C) If a title plant of an underwritten title company is not
currently maintained, the asset value of the plant shall not exceed
its asset value as determined in the preceding paragraph as of the
date to which that plant is currently maintained, less one-tenth
thereof for each succeeding year or part of the succeeding year that
the plant is not being currently maintained. For the purposes of this
section, a title plant shall be deemed currently maintained so long
as it is used in the normal conduct of the business of title
insurance, and (i) the owner of the plant continues regularly to
obtain and index title record data to the plant or to a continuation
thereof in a format other than that previously used, including, but
not limited to, computerization of the data, or (ii) the owner of the
plant is a participant, in an arrangement for joint use of a title
plant system regularly maintained in any format, provided the owner
is contractually entitled to receive a copy of the title record data
contained in the jointly used title plant system during the period of
the owner's participation therein, either periodically or upon
termination of that participation, at a cost not to exceed the actual
cost of duplication of the title record data.
(D) An underwritten title company shall at all times maintain
current assets of at least ten thousand dollars ($10,000) in excess
of its current liabilities, as current assets and liabilities may be
defined pursuant to regulations made by the commissioner. In making
the regulations, the commissioner shall be guided by generally
accepted accounting principles followed by certified public
accountants in this state.
(3) (A) An underwritten title company shall obtain from the
commissioner a license to transact its business. The license shall
not be granted until the applicant conforms to the requirements of
this section and all other provisions of this code specifically
applicable to the applicant. After issuance the holder of the license
shall continue to comply with the requirements as to its business
set forth in this code, in the applicable rules and regulations of
the commissioner, and in the laws of this state.
(B) An underwritten title company that possesses, or is required
to possess, a license pursuant to this section shall be subject as if
an insurer to the provisions of Article 8 (commencing with Section
820) of Chapter 1 of Part 2 of Division 1 of this code and is deemed
to be subject to authorization by the Insurance Commissioner within
the meaning of subdivision (e) of Section 25100 of the Corporations
Code.
(C) The license may be obtained by filing an application on a form
prescribed by the commissioner accompanied by a filing fee of three
hundred fifty-four dollars ($354). The license when issued shall be
for an indefinite term and shall expire with the termination of the
existence of the holder, subject to the annual renewal fee imposed
under Sections 12415 and 12416.
(D) An underwritten title company seeking to extend its license to
an additional county shall pay a two-hundred-seven-dollar ($207) fee
for each additional county, and shall furnish to the commissioner
evidence, at least sufficient to meet the minimum net worth
requirements of paragraph (2), of its financial ability to expand its
business operation to include the additional county or counties.
(4) (A) An underwritten title company shall furnish an audit to
the commissioner on the forms provided by the commissioner annually,
either on a calendar year basis on or before March 31 or, if approved
in writing by the commissioner in respect to any individual company,
on a fiscal year basis on or before 90 days after the end of the
fiscal year. The time for furnishing any audit required by this
paragraph may be extended, for good cause shown, on written approval
of the commissioner for a period, not to exceed 60 days. Failure to
submit an audit on time, or within the extended time that the
commissioner may grant, is grounds for an order by the commissioner
to accept no new business pursuant to subdivision (d). The audits
shall be private, except that a synopsis of the balance sheet on a
form prescribed by the commissioner may be made available to the
public.
(B) The audits shall be made in accordance with generally accepted
auditing standards by an independent certified public accountant or
independent licensed public accountant whose certification or license
is in good standing at the time of the preparation. The fee for
filing the audit shall be three hundred thirteen dollars ($313).
(C) The commissioner may refuse to accept an audit or order a new
audit for any of the following reasons:
(i) An adverse result in any proceeding before the California
Board of Accountancy affecting the auditor's license.
(ii) The auditor has an affiliation with the underwritten title
company or any of its officers or directors that would prevent his or
her reports on the company from being reasonably objective.
(iii) The auditor has been convicted of a misdemeanor or felony
based on his or her activities as an accountant.
(iv) A judgment adverse to the auditor in any civil action finding
him or her guilty of fraud, deceit, or misrepresentation in the
practice of his or her profession.
(D) A company that fails to file an audit or other report on or
before the date it is due shall pay to the commissioner a penalty fee
of one hundred eighteen dollars ($118) and on failure to pay that or
another fee or file the audit required by this section shall forfeit
the privilege of accepting new business until the delinquency is
corrected.
(b)
(c) An underwritten title company may engage in the
escrow business and act as escrow agent, provided that:
(1) It maintains a record of all receipts and disbursements of
escrow funds.
(2) (A) Except as provided in subdivision (c), the
The company shall maintain a bond
satisfactory to the commissioner in the amount of one of the
following: of fifty thousand dollars ($50,000).
(i) Twenty-five thousand dollars ($25,000) if 150 percent of the
previous year's average annual trust fund obligations, as calculated
in subparagraph (D), does not exceed two hundred fifty thousand
dollars ($250,000).
(ii) Thirty-five thousand dollars ($35,000) if 150 percent of the
previous year's average annual trust fund obligations, as calculated
in subparagraph (D), exceeds two hundred fifty thousand dollars
($250,000), but does not exceed five hundred thousand dollars
($500,000).
(iii) Fifty thousand dollars ($50,000) if 150 percent of the
previous year's average annual trust fund obligations, as calculated
in subparagraph (D), exceeds five hundred thousand dollars
($500,000).
(B) A deposit given instead of the bond required by this section
shall not be deemed an asset of the applicant or licensee.
(C)
(B) An applicant or licensee may make a cash
deposit or obtain obtain an irrevocable letter
of credit approved by the commissioner in lieu
lieu, and in the amount, of the bond. The bond,
cash deposit, or bond or letter of credit, as
applicable, shall run to the state for the use of the state, and for
any person who has cause against the obligor of the bond or the
applicant of a letter of credit, under the provision
provisions of this division.
chapter.
(D) Calculations of trust fund obligations shall be based on the
previous calendar year's average of the monthly trust fund
liabilities or credit balances occurring on the last day of each
calendar month.
(3) (A) The issuance of a bond or letter of credit of an
bond provided by a surety insurer naming the
underwritten title company, and company as
principal obligor or the use of a cash deposit
letter of credit of an underwritten
title company, issuing bank shall be subject to
the following conditions:
(i) The licensee shall faithfully conform to and abide by the
provisions of this division chapter and
all of the rules made by the commissioner under this
division. chapter concerning the conduct of escrow
services.
(ii) The licensee will honestly and faithfully apply all funds
received, and will faithfully and honestly perform all
obligations and undertakings under this division, and will
pay to the state or to the person under the provisions of this
division, including the costs in any conservatorship, or liquidation,
whether by the commissioner or by a receiver.
chapter, concerning the conduct of escrow services.
(B) In determining the liability of the principal and the sureties
under the bond, the applicant and issuing bank of a letter
of credit, or the use of a cash deposit, escrow money held in trust
and any money recovered to restore any deficiency in the
trust shall not be considered as an asset
of the liquidation subject to the assessment for the
cost of the liquidation.
(C) The surety under the bond, or the issuing bank of a letter of
credit, may pay the full amount of its liability thereunder to the
commissioner or a conservator as conservator,
liquidator, receiver, or anyone appointed by the commissioner
as a conservator, liquidator, or receiver in lieu of
payment to the state or persons having a cause of action against the
principal of a bond or applicant under a letter of credit, and upon
such payment the surety under a on the
bond, or the issuing bank under a letter of credit, is
credit shall be completely released
released, discharged, and exonerated from
further liability under the bond or letter of credit, as applicable.
The conservator, liquidator, or receiver may use the proceeds of
the bond, or letter of credit, for any purposes, including the
funding of the costs of conservatorship, receivership, or
liquidation.
(D) If there is no reasonable or adequate admitted market for
surety bonds as required by this section, the commissioner may act
pursuant to Section 1763.1 or, under extraordinary circumstances and
for good cause shown, permit a cash deposit in lieu thereof, and in
the amount of the bond required by this section. In that case, the
commissioner may fashion the deposit requirements as appropriate to
the circumstances and cause.
(4) On and after July 1, 2016, the commissioner shall
promptly release all individual to the
depositor, upon application, all escrow-related deposits
previously made pursuant to paragraph (2) of subdivision (b)
of Section 12389, as amended by Section 4 of the act that added this
section, paragraph (2) of subdivision (c) of former
Section 12389 if any of the following occurs:
(A) The underwritten title company has deposited with
provided to the commissioner bond coverage
acceptable to the commissioner, or an
approved irrevocable letter of credit or a cash deposit in
lieu of the letter of credit as set forth in
subdivision (b). this subdivision.
(B) Presentation Upon presentation
of evidence satisfactory to the commissioner of either a statutory
merger of the underwritten title company depositor into a licensee or
certificate holder subject to the jurisdiction of the commissioner,
or a valid assumption agreement under which all liability of the
depositor stemming from escrow transactions handled by it is assumed
by a licensee or certificate holder subject to the jurisdiction of
the commissioner.
(5) With the foregoing exceptions,
Otherwise the deposit shall be promptly returned to
the depositor, its duly appointed trustee in bankruptcy or lawful
successor in interest upon application for release
following the four-year period specified in paragraph (2) of
subdivision (b) , as that paragraph read on June 30, 2016,
unless the commissioner has received claims against the deposit
stemming from escrow transactions handled by the depositor. If the
commissioner has received one or more claims against the depositor,
and the depositor is not in conservatorship
conservatorship, bankruptcy, or liquidation, the commissioner
may interplead the deposit by special endorsement to a court of
competent jurisdiction for distribution on the basis that claims
against the depositor stemming from escrow transactions handled by
the depositor have priority in the distribution over other claims
against the depositor.
(c) A new applicant for an underwritten title company license
shall deposit with the commissioner a bond satisfactory to the
commissioner in the amount of at least twenty-five thousand dollars
($25,000) or a cash deposit in said amount. After 12 months of
operation as a new underwritten title company, the applicant shall
comply with the requirements set forth in paragraph (3) of
subdivision (b).
(d) The commissioner shall, whenever it appears necessary, examine
the business and affairs of a company licensed under this section.
The examination shall be at the expense of the company.
(e) (1) At any time that the commissioner determines, after notice
and hearing, that a company licensed under this section has
willfully failed to comply with a provision of this section, the
commissioner shall make his or her order prohibiting the company from
conducting its business for a period of not more than one year.
(2) A company that violates the commissioner's order is subject to
seizure under Article 14 (commencing with Section 1010) of Chapter 1
of Part 2 of Division 1, is guilty of a misdemeanor, and may have
its license revoked by the commissioner. Any person aiding and
abetting any company in a violation of the commissioner's order is
guilty of a misdemeanor.
(f) The purpose of this section is to maintain the solvency of the
companies subject to this section and to protect the public by
preventing fraud and requiring fair dealing. In order to carry out
these purposes, the commissioner may make reasonable rules and
regulations to govern the conduct of its business of companies
subject to this section. The rules and regulations shall be adopted,
amended, or repealed in accordance with the procedures provided in
Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3
of Title 2 of the Government Code.
(g) The name under which each underwritten title company is
licensed shall at all times be an approved name. The fee for filing
an application for a change of name shall be one hundred eighteen
dollars ($118). Each company shall be subject to the provisions of
Article 14 (commencing with Section 1010) and Article 14.5
(commencing with Section 1065.1) of Chapter 1 of Part 2 of Division
1.
(h) This section does not prohibit an underwritten title company
from engaging in escrow, settlement, or closing activities on
properties located outside this state if those activities do not
violate the laws of that other state or country.
(i) This section is operative on July 1, 2016.