HB 1480 -- Title Insurance

Sponsor:  Dempsey

This bill changes the laws regarding the enforcement powers of
the Department of Insurance and establishes the Missouri Title
Insurance Act.

ENFORCEMENT POWERS OF THE DEPARTMENT OF INSURANCE

The bill:

(1)  Revises the department's enforcement procedures for various
violations of the state insurance code.  If the department
director determines that a person has violated or is attempting
to violate a provision of the code, the director may:

(a)  Issue an order directing the person to cease and desist;

(b)  Issue a curative order or order directing the person to take
other necessary action to comply with the insurance laws;

(c)  Order a civil penalty or forfeiture; and

(d)  Award reasonable costs of the investigation.

(2)  Requires the director, unless summary action is needed to
protect consumers, to provide notice of intent to issue an order.
The notice will specify the reasons for the action and the
director will schedule a hearing at least 10 days after the
notice;

(3)  Changes the penalty for violating a cease and desist order
from a maximum $1,000 fine and up to one year in jail to a
maximum $100,000 fine and up to 10 years in jail;

(4)  Allows the director to revoke a corporation's or insurer's
certificate of authority for violations of Missouri's insurance
laws or for a felony or misdemeanor conviction;

(5)  Allows the director to maintain an action in county circuit
courts to issue injunctions, freeze assets, or take other
appropriate or ancillary relief.  The Consumer Restitution Fund
is created to make restitution to aggrieved consumers of funds
obtained through enforcement proceedings;

(6)  Classifies various violations of insurance laws into five
categories from level one through level five.  Maximum fines are
established at each level with level one being the least and
level five the highest.  All fines collected will go to fund
public schools as required by Article IX, Section 7, of the
Missouri Constitution; and

(7)  Allows any applicant who is refused a license to file a
petition with the Administrative Hearing Commission.  The
director will have the burden of proof for the refusal.

MISSOURI TITLE INSURANCE ACT

The bill establishes the Missouri Title Insurance Act.  In its
main provisions, the bill:

(1)  Requires a title insurer or title agent issuing a lender's
title insurance policy, when no owner's policy has been
requested, to give written notice to a purchaser/mortgagor that
the lender's policy does not protect the purchaser;

(2)  Requires a written contract specifying the responsibilities
between a title insurer and a title insurance agent and the title
insurer's supervisory responsibilities regarding title insurance
agents;

(3)  Permits a title insurer or title insurance agent to operate
as an escrow, security, settlement, or closing agent if certain
listed requirements are met;

(4)  Requires title insurers to conduct on-site reviews at least
annually on the practices and procedures of title insurance
agencies or agents with which they contract.  Reports will be
maintained for at least four years and made available to the
director upon request;

(5)  Makes it unlawful for any title agency or agent not
affiliated with an agency to deny reasonable access or fail to
cooperate with its underwriters in the title insurers' review of
its accounts;

(6)  Prohibits title insurers, agencies, agents, or other persons
from receiving any consideration for the referral of any title
services provided;

(7)  Requires settlement agents to record all deeds and security
instruments within five business days after completion;

(8)  Specifies that a title insurer is liable for the conversion
or misappropriation of funds held in trust by a licensed title
insurance agent or agency who is acting as an agent for the
insurer.  If more than one title insurer is involved, the insurer
or insurers having coverage prior to the illegal act will be
liable;

(9)  Prohibits title insurers or agents from participating in
transactions in which they know the loan producer requires a
party to obtain title insurance from a particular insurer or
agent.  Offering payments or rebates as an inducement to contract
for title insurance is also prohibited;

(10)  Requires title insurers to file all premium rates and
supplementary rate information with the director before the rates
become effective.  If any rates are found to be excessive,
inadequate, or unfairly discriminatory, the director can
disapprove the rate.  If an insurer's rates are disapproved, he
or she may request a hearing.  Rate information is a public
record;

(11)  Requires that no title insurance policy be written until a
title search has been completed and the property found insurable.
Once completed, all required outstanding, enforceable recorded
liens, or other interests against the title must be shown;

(12)  Allows the director, if it is determined that a person has
or may engage in a violation of title insurance laws, to issue
administrative orders as authorized under Section 374.046, RSMo,
to suspend or revoke the license of a producer or the certificate
of authority of any title insurer for the violations and bring
action in court to enjoin violations of the Real Estate
Settlement Procedures Act;

(13)  Prohibits an insurer that transacts any other class, type,
or kind of business from obtaining a title insurance license,
except that a title insurer can issue closing or settlement
protection;

(14)  Requires title insurers to maintain at least $800,000 each
of paid-in capital and surpluses;

(15)  Prohibits the net retained liability of a title insurer for
a single risk from exceeding 50% of the surplus of all risks
insured;

(16)  Requires when determining the financial condition of a
title insurer that the general investment provisions of Sections
379.080 to 379.082 will apply except that an investment in a
title plant equal to the cost will be allowed as long as the
aggregate amount of all investments does not exceed 20% of the
surplus to policyholders;

(17)  Prohibits the use of listed title insurance forms unless
the forms have been approved by the director;

(18)  Allows the director to establish a policy issuance fee, not
to exceed $2, on each title insurance policy;

(19)  Requires all title insurance agents to be licensed, lists
their responsibilities and obligations for licensure, and
specifies the title insurance continuing education requirements;

(20)  Allows the director to inspect the records of title
agencies, insurance agencies, and agents; and

(21)  Requires titled insurers, agencies, or agents to disclose
and provide required information on any affiliated businesses
involved in the transaction prior to commencing the transaction.

Missouri House of Representatives
93rd General Assembly, 2nd Regular Session
Last Updated November 29, 2006 at 9:43 am