- October 08, 2010
- All Offices Authorized to Issue Title Insurance in the District of Columbia
- Regulation of Title Agents in the District of Columbia
Please note that there is a newly revised Schedule of Charges for the District of Columbia dated March 5, 2010. For electronic access to this manual, you may go to our local website:
After many years of discussion, the District of Columbia finally passed legislation dealing with the regulation of the title insurance business. This landmark legislation was passed by the DC Council and became effective on September 24, 2010.
The legislation actually consists of 2 separate acts (plus amendments to several other existing insurance statutes). One, the Title Insurance Producer Emergency Act of 2010, regulates the activities of title insurance producers (the "Producer Act"). The other, the Title Insurance Insurer Emergency Act of 2010, regulates all activities of title insurance companies including title rates and forms (the "Insurer Act").
The DC Department of Insurance, Securities and Banking ("DISB") has been designated as the overseer of the act. We are still awaiting guidance on a number of issues and at this point we have not seen any forms or regulations setting forth how DISB plans to implement the Acts. With that in mind, here is a brief summary of certain of the important provisions of the Acts.
Two important dates loom for us. In general, the Acts apply to transactions closing after December 31, 2010.
The Acts appear to have language which attempts to delay the requirement for obtaining a license until 180 days after the applicability date (January 1, 2011). Unfortunately, the language is somewhat confusing as it states "A title insurance producer operating in the District of Columbia licensed in the District of Columbia on the applicability date of this subtitle shall have 180 days after the applicability date of this subtitle to comply with the requirements of this subsection." This would seem to only delay implementation if you had a DC license on January 1, 2011. Until we receive further guidance from DISB, we must assume that the Producer Act must be complied with by January 1, 2011.
Who is a title insurance producer?
A title insurance producer ("Producer") is broadly defined as a person who performs the following acts in connection with the issuance of a title insurance commitment or policy covering residential or personal property situated in the District of Columbia:
- Determining insurability and issuing title insurance commitments or policies based upon the performance or review of a search or abstract.
- Soliciting or negotiating "title insurance business".
The term "title insurance business" is itself broadly defined. In addition to including the issuance of title insurance policies, it includes any of the following activities:
- Soliciting or negotiating title policies
- Executing title policies
- Abstracting, searching or examining titles (but excluding employees of abstracting companies)
Based upon the foregoing, it appears that only those issuing policies on residential transactions are considered Producers (and thus need to be licensed). Residential property is defined as 1 to 4 residential dwelling units. This point will need to be clarified with the DISB.
Please also note that given the broad scope of the definition of title insurance business, you do not need to underwrite or sign title policies in order to be considered a Producer. For example, abstracting companies are considered Producers and closers may be included if they are considered to be soliciting or negotiating title policies.
Resident and non-resident title insurance Producers must be licensed.
A person who both resides in and maintains their principal place of business in the District of Columbia must apply for a resident insurance Producer license. Conversely, a person who neither resides in nor maintains their principal place of business in the District of Columbia must apply for a nonresident insurance Producer license. If you are either a resident or maintain your principal place of business in the District of Columbia, you apply for a (i) nonresident license if you maintain a resident license in another state or (ii) a resident license if you do not otherwise have a resident license. In all other instances, a nonresident license would be applicable.
Attorneys are required to have licenses but are exempt from the pre-licensing education requirements and the examination requirements.
Requirements for licensing of title insurance Producers
Applicants for a license must complete a pre-licensing course and pass the licensing exam. The following parties are exempt from this requirement:
- Licensed attorneys.
- Producers with a certification from a title insurance insurer stating that the agent has had signing authority on policies or commitments for the past 3 years with respect to property in the District of Columbia. This certification must be submitted within 1 year after the effective date of the Act.
In addition, a full time employee of a title insurer is exempt from the pre-licensing course of study. They must, however, take the licensing exam.
A Producer must fulfill 8 hours of continuing education each year of which not more than 4 may be computer or video based. Attorneys must fulfill 4 hours of continuing education each year.
Producers must maintain errors and omissions coverage of $500,000. Producers must maintain Fidelity coverage of $250,000 if they handle escrow or indemnity deposits.
Nonresident title insurance Producers must have a registered agent in the District of Columbia at the time of application for a Producer licenses. It remains to be seen how this will be implemented for individuals.
Operations including required disclosures and record retention
Producers must maintain sufficient records of their affairs, including escrow operations and trust accounts, so that the Commissioner may insure that the Producer is in compliance with the statute. The Commissioner may prescribe specific rules on document retention but the retention period will not exceed 3 years.
A title commitment for owner’s title insurance relating to owner occupied residential property of 4 or fewer units must have the following statement on the first page in bold type:
"Please read the exceptions and the terms shown or referred to herein carefully. The exceptions are meant to provide you with notice of matters which are not covered under the terms of the title insurance policy and should be carefully considered.
It is important to note that this form in not a written representation as to the condition of title and may not list all liens, defects, and encumbrances affecting title to the land."
In connection with purchases of owner occupied residential property where a loan policy will be issued but no owner’s policy has been requested, the Producer shall give notice, on a form prescribed or approved by the Commissioner, to the purchaser at the time the commitment is prepared. The notice shall explain:
a. A lender’s policy protecting the lender will be issued;
b. The loan policy does not protect the purchaser;
c. What a title policy insures against and what possible exposures exist for the purchaser that could be insured against;
d. The purchaser may obtain an owner’s title policy and its cost.
This notice must be signed by the purchaser and maintained by the Producer for 3 years.
Rebates, discounts, credits or reductions of premiums are specifically prohibited in residential transactions. At this point it is unclear as to whether these restrictions apply to commercial transactions.
All funds deposited with a Producer or insurer in connection with an escrow, settlement, closing or indemnity deposit must be deposited in a fiduciary trust account in accordance with the Real Property Wet Settlement Act of 1986 unless otherwise agreed to in writing. All funds must be segregated on the records of the Producer in a manner that permits identification. The funds may only be applied in accordance with the terms of the individual instructions, settlement statement or agreements under which the funds were accepted.
Interest on escrows shall be paid, net of administrative costs, to the depositing party unless the depositor’s written instructions provide otherwise.
Disbursements may only be made if there are good funds in the escrow account. Good funds includes cash, wire transfers, cleared checks and ACH transfers. The exception to this is that a Producer may disburse based upon a check in the amount of $3000 or less that has not cleared.
Escrow accounts must be audited annually within 90 days of the close of the previous calendar year by either an accountant or the Producer’s title insurer. All audit reports must be delivered to each title insurer for which the Producer maintains an appointment by April 30th of that year. Attorneys are exempt from this requirement but a title insurer does have the right to audit those accounts if it so chooses. DISB may, if it chooses, require that audits be delivered to them.
Filing of policy forms and rates
A title insurer may not use any form unless it has been filed with DISB. Forms include title policies, standard form endorsements, title commitments and closing protection letters. Any term or condition related to an insurance coverage provided by an approved title policy or any exception to coverage (other than those ascertained from a search of title, or inspection or survey of the property) shall only be included in a title policy after the term, condition, or exception has been filed with DISB and approved. Forms that are filed and not objected to within 30 days are deemed approved.
All rates must now be filed and approved by DISB. These are the only rates that may be charged. Filing by a rating bureau is permitted.
The charge for closing protection letters for sellers, borrowers or buyers who do not purchase title insurance in residential transactions must be no less than $50.
Relations between Producers and Insurers.
There must be a written contract between the parties.
The title insurer must have on file for each Producer a statement of financial condition as of the end of the previous calendar year setting forth an income statement and balance sheet as of the prior December 31st certified by the Producer as being a true and accurate representation of the Producer’s financial condition.
The title insurer shall at least annually conduct an on-site review, or a review conducted electronically that would accomplish the functional equivalent of the same, of the underwriting, claims and escrow practices of the Producer which shall include a review of the Producer’s policy inventory and processing operations. If the Producer does not maintain separate trust accounts for each title insurer, the title insurer shall verify that the funds held on its behalf reasonably are ascertainable.
Within 30 days of executing or terminating a contract with a Producer, the title insurer shall provide written notification of the appointment or termination and the reason for termination to the Commissioner.
The title insurer shall maintain an inventory of all policy forms or policy numbers allocated to each Producer.
The title insurer shall have on file proof that the Producer is licensed.
If you have questions relating to this bulletin, please contact your local underwriting personnel or Stewart Legal Services.
For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.
THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.