text:
Group legal insurance shall mean that form of legal insurance covering groups of persons as defined in this chapter with or without one or more of their dependents and issued upon one of the following bases:

(a) Under a policy issued to an employer insuring employees of the employer;

(b) Under a policy issued to a labor union insuring members of the union;

(c) Under a policy issued to the trustees of a fund established by two or more employers in the same industry or by one or more labor unions or by one or more employers and one or more labor unions, which trustees shall be deemed the policyholder insuring employees of the employers or members of the union;

(d) Under a policy issued to any other organization or combination of organizations, incorporated or otherwise, (including professional associations, trade associations, or other organizations) whose members have common concerns or problems, or have joined together as a means for bargaining for a particular position, or have voluntarily formed or become members of an organization designed to perform a service for its members, or any other substantially similar organization, excluding an organization or combination of organizations that is formed or maintained solely for the purposes of obtaining insurance.

history: (History: Added by renumbering Section 12121 (as amended by Stats. 1974, Ch. 1161) by Stats. 1995, Ch. 91, Sec. 100. Effective January 1, 1996.)

chapter: 3. Group and Individual Plans for Legal Insurance


kind: section

code: INS

text:
Group and individual legal insurance may be offered in this state subject to all the following conditions:

(a) Premium rates shall comply with any pertinent standards in this code, including the standards that rates not be excessive, inadequate, or unfairly discriminatory. Rates for group legal insurance shall not be deemed to be unfairly discriminatory because different premiums result for policyholders with like loss exposures but different expense factors, or like expense factors but different loss exposures, so long as the rates reflect the difference with reasonable accuracy. Rates shall not be considered to be unfairly discriminatory if they are averaged broadly among persons insured under a group legal insurance plan.

(b) No policy or certificate of legal insurance may be delivered or issued for delivery in this state unless and until a copy of the form thereof has been filed with the commissioner. However, this subdivision shall apply only to an insurer for a two-year period immediately following the date upon which it files its first policy or certificate of legal insurance with the commissioner.

(c) No policy of group legal insurance may be delivered or issued for delivery in this state unless it contains a provision that the insurer shall issue to the person in whose name the policy is issued, for delivery to each member of the insured group, a certificate setting forth in a summary form a statement of the essential features of the insurance coverage and to whom benefits thereunder are payable. If dependents are included in the coverage, only one certificate need be issued for each family unit. Any certificates delivered to members of an insured group pursuant to this subdivision shall be required to be “individualized” within the meaning of that term as it is defined by Section 10270.63 only if members of the group contribute to the payment of the legal insurance premiums.

history: (History: Added by renumbering Section 12122 (as amended by Stats. 1974, Ch. 1161) by Stats. 1995, Ch. 91, Sec. 102. Effective January 1, 1996.)

division: 2. CLASSES OF INSURANCE

part: 4. MISCELLANEOUS CASUALTY INSURANCES

path: 2. CLASSES OF INSURANCE > 4. MISCELLANEOUS CASUALTY INSURANCES > 3. Group and Individual Plans for Legal Insurance


text: In every group legal insurance plan, the employer, labor union, trustees, or other person to whom a group legal insurance plan policy is issued shall be the policyholder for all purposes of entering into, amending, or terminating any contract of legal insurance, administering any legal insurance plan, and exercising any voting rights to which the policyholder is entitled. If entitled to vote at meetings of the insurer, such policyholder shall be entitled to one vote.

history: (History: Added by renumbering Section 12123 by Stats. 1995, Ch. 91, Sec. 103. Effective January 1, 1996.)


text: The provisions of this chapter shall be enforced by the commissioner, and he may, after notice and public hearing, promulgate such reasonable rules and regulations as are necessary to administer this chapter.

history: (History: Added by renumbering Section 12124 by Stats. 1995, Ch. 91, Sec. 104. Effective January 1, 1996.)


text:
This part shall not apply to any of the following:

(a) A duly authorized attorney at law acting in the usual course of his profession.

(b) An admitted insurer.

(c) An association of motor carriers.

(d) A person who is directly or indirectly engaged, either as principal or agent, in selling or offering for sale, furnishing, or procuring any of the services described in Section 12148, 12152, or 12153, or miscellaneous service that augments or is incidental to any of those services, but who is not directly or indirectly engaged, either as principal or agent, in selling or offering for sale, furnishing, or procuring any other service described in this chapter.

(e) A person who is licensed as a vehicle service contract provider and offering any of the services described in paragraphs (1) to (4), inclusive, of subdivision (c) of Section 12800, to the extent that person is providing the services described therein.

(f) A person offering the services described in paragraph (7) of subdivision (a) of Section 12805 to the extent that person is providing the services described therein.

(g) An agreement that promises routine maintenance.

history: (History: Amended by Stats. 2016, Ch. 386, Sec. 2. (AB 2354) Effective January 1, 2017.)

part: 5. MOTOR CLUBS

chapter: 1. Definitions and Exemptions

path: 2. CLASSES OF INSURANCE > 5. MOTOR CLUBS > 1. Definitions and Exemptions


text: Except where the context otherwise requires, the terms used in this part shall be given the meanings set forth in this chapter, but such meaning shall not, merely by reason of enactment in this chapter, govern the interpretation of any other provision of this code.

history: (History: Enacted by Stats. 1935, Ch. 145.)


text:
(a) Except as provided in subdivision (b), a motor club is a person, directly or indirectly engaged, either as principal or agent, in selling or offering for sale, furnishing or procuring motor club service.

(b) A person who is directly or indirectly engaged, either as principal or agent, in selling or offering for sale, furnishing, or procuring any of the services described in Section 12148, 12152, or 12153, or miscellaneous service that augments or is incidental to any of those services, but who is not directly or indirectly engaged, either as principal or agent, in selling or offering for sale, furnishing, or procuring any other service described in this chapter, is not a motor club.

history: (History: Amended by Stats. 2003, Ch. 88, Sec. 2. Effective January 1, 2004.)


text: The commissioner shall adopt reasonable rules and regulations specifying the types of miscellaneous service permitted under subdivision (d) of Section 12140 and subdivision (b) of Section 12142. The rules and regulations shall be adopted, amended, and 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.

history: (History: Added by Stats. 2003, Ch. 88, Sec. 3. Effective January 1, 2004.)


text: A club agent is a person other than the motor club itself, who acts or aids in any manner in the solicitation, delivery, or negotiation of any membership or service contract, or of the renewal or continuance thereof.

history: (History: Amended by Stats. 1972, Ch. 179.)


text:
Motor club service is the rendering or procuring of, or reimbursement for, any of the services defined in this chapter to any person in connection with the ownership, operation, use, or maintenance of a motor vehicle, including a vacation trailer, house or otherwise, or a boat capable of ordinary transportation on a trailer and its trailer, by the person upon any of the following considerations:

(a) The person is or will become a member of the club rendering or furnishing the service.

(b) The person is or will become in any manner affiliated with the club.

(c) The person is or will become entitled to receive membership or other motor club service from the club by virtue of any agreement or understanding with any club.

This section shall not authorize a motor club to furnish any service on a reimbursement basis that constitutes the transaction of insurance. The commissioner may make reasonable rules and regulations specifying services that constitute the transaction of insurance for the purposes of this part and which may not be offered on a reimbursement basis. Rules and regulations shall be adopted, amended, and repealed in accordance with Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code.

history: (History: Amended by Stats. 2004, Ch. 183, Sec. 248. Effective January 1, 2005.)


text: Towing service is the drafting or moving by a motor club of a motor vehicle from one place to another under other power than its own.


text: Emergency road service is the adjustment, repair or replacement by a motor club of the equipment, tires or mechanical parts of a motor vehicle so as to permit it to be operated under its own power.


text: Discount service is an arrangement by a motor club resulting in giving special discounts, rebates or reductions of price on gasoline, oil, repairs, insurance, parts, accessories or service for motor vehicles to holders of service contracts with any such club.


text: Financial service is an arrangement by a motor club whereby loans or other advances of money are made to holders of service contracts with any such club.


text:
(a) Buying and selling service is an arrangement by a motor club whereby the holder of a service contract with a motor club is aided in any way in the purchase or sale of an automobile.

(b) (1) If a motor club offers a service that refers members to a new motor vehicle dealer for the purchase of a new motor vehicle, and the dealer pays the motor club any compensation, including, but not limited to, an advertising, promotional, or marketing fee, any advertisement of that service shall clearly and conspicuously disclose that the dealer has paid the fee and shall have the following statement: “All new cars arranged for sale are subject to availability and a price prearranged with the selling franchised new car dealer.”

(2) In a printed advertisement, the disclosures required by paragraph (1) shall be in not less than 10-point bold type and shall be textually segregated from the other portions of the advertisement.

(3) The disclosures required by paragraph (1) do not apply to general advertisements of a motor club that merely list an auto buying service as one of several services offered by the motor club and that do not provide any details of the auto buying service.

history: (History: Amended by Stats. 1994, Ch. 1253, Sec. 2. Effective January 1, 1995.)


text: Theft service is an act by a motor club for the purpose of locating, identifying or recovering a stolen or missing motor vehicle owned or controlled by the holder of a service contract with any such club or for the purpose of detecting or apprehending the person guilty of the theft.


text: Map service is the furnishing by a motor club of road maps without cost to holders of service contracts with any such club.


text:
Travel service is the furnishing by a motor club of touring and travel aids and assistance, and may include any or all of the following:

(a) Road maps, touring guides, directories of accommodations for travelers, club periodicals, travel information, magazines, and brochures.

(b) Procuring travel tickets of all kinds and reservations for accommodations in connections therewith.

history: (History: Repealed and added by Stats. 1969, Ch. 858.)


text: Claim adjustment service is an act by a motor club for the purpose of adjusting claims on behalf of the holder of a service contract with any such club, when such claim results from injury or damage to person or property arising out of an accident, in connection with the ownership, maintenance, operation and use of a motor vehicle.


text:
License service is the rendering of assistance by a motor club to any person in obtaining:

(a) Registration of a motor vehicle with the State.

(b) A driver’s license.

(c) A transfer of legal or registered ownership upon the records of the Department of Motor Vehicles.

history: (History: Amended by Stats. 1963, Ch. 209.)


text:
Insurance service is the selling or giving, with a service contract or as a result of membership in or affiliation with a motor club, of a policy of insurance covering liability or loss by the holder resulting from injury or damage to person or property arising out of an accident, such liability or loss being the consequence of the ownership, maintenance, operation, or use of a motor vehicle.

Insurance service also includes the selling or giving with a service contract or as a result of membership in or affiliation with a motor club, of a policy of insurance, or a certificate under a master policy in which the club is the master policyholder, covering the club member, or any member of his family, for loss, other than loss of time, from accidental injury from any cause or accidental death from any cause. For such purpose any certificated motor club is deemed to be an “association” within the meaning of Section 10270.5 and the club members and members of their families are deemed to be members of such association.


text: Any act by a motor club for the purpose of rendering a service defined in this chapter constitutes such service, whether or not the service as defined is completed.


text: A service contract is a written agreement whereby any person promises for a consideration to render, furnish or procure motor club service for any other person.


text: Miscellaneous service means any other service which may be furnished and which augments or is incidental to any service performed by the club as authorized under the provisions of this chapter or any other service which is of assistance and is beneficial to its members and is feasible for the club to render.

history: (History: Added by Stats. 1969, Ch. 858.)


text:
(a) A person shall not render or agree to render motor club service in this state without first obtaining from the commissioner a certificate of authority to act as a motor club.

(b) The issuance, sale, or offer for sale in this state of securities of its own issue by any motor club shall be subject to the provisions of Article 8 (commencing with Section 820) of Chapter 1 of Part 2 of Division 1 of this code the same as if motor clubs were included in Section 826 thereof, and any such club shall not be subject to the Corporate Securities Law in the Corporations Code.

chapter: 2. Certificate of Authority

path: 2. CLASSES OF INSURANCE > 5. MOTOR CLUBS > 2. Certificate of Authority


text: Application for a certificate of authority shall be made on a form prescribed by the commissioner, accompanied by a filing fee of four thousand nine hundred thirty-nine dollars ($4,939). That certificate shall not be granted until the applicant conforms to the requirements of this part and the laws of this state prerequisite to its issue. After the issuance, the holder shall continue to comply with the requirements of this part and the laws of this state.

history: (History: Amended by Stats. 2017, Ch. 534, Sec. 74. (AB 1699) Effective January 1, 2018.)


text:
The commissioner shall not issue a certificate of authority to any motor club until:

(a) It files with him or her the following:

(1) A formal application for the certificate in that form and detail as the commissioner requires, executed under oath by its president or other principal officer.

(2) A certified copy of its charter or articles of incorporation and its bylaws, if any.

(3) A copy of its latest financial statement, or report of independent audit as the commissioner may require; or, in the event neither is available, its most recent operating statement and balance sheet. Any financial statement, audit, operating and balance sheet shall be verified by the person compiling or making the same and by an executive officer of the applicant.

(4) If it is a foreign corporation, a certificate from its domiciliary state regulatory authority executed not more than 30 days before the filing of its application that it is duly authorized to do a motor club business in that state.

(5) An explanation of its plan of doing business, and copies of the following: its application for membership; the proposed membership certificate or identification card; any proposed addendum thereto; any individual insurance policy and any group master policy and individual certificates thereunder to be offered; any service contract to be issued.

(6) Other information as the commissioner may find necessary in order to determine the applicant’s qualifications.

(b) It first deposits security with the commissioner in one of the following forms:

(1) Securities of the kinds prescribed by this code for capital fund investments by stock insurers and approved by the commissioner, in the amount of one hundred thousand dollars ($100,000) based on par value or market value, whichever is less. The making, maintenance and withdrawal of those deposits and the substitution of securities therein shall be governed by Article 11 (commencing with Section 939) of Chapter 1 of Part 2 of Division 1.

(2) A surety bond on a form prescribed by the Attorney General of this state, executed by an admitted surety insurer in the penal sum of one hundred thousand dollars ($100,000).

(c) It pays to the commissioner an annual license fee of four hundred twenty-four dollars ($424).

(d) Its name is approved by the commissioner under Section 881, which applies to motor clubs.

(e) It proves by affidavits of its officers, directors, managers, and individual owners of more than 10 percent on a form prescribed by the commissioner that it is not disqualified under Section 704.5.

(f) It satisfies the commissioner it is qualified as respects each of the subjects enumerated in subdivisions (b), (c), (e), (f), (h), (i), and (j) of Section 717, when those subjects are read in the sense of protection to its members instead of policyholders.

(g) It is a separate legal entity capable of being examined by the commissioner as provided in this part.

history: (History: Amended by Stats. 2017, Ch. 534, Sec. 75. (AB 1699) Effective January 1, 2018.)


text: All motor clubs applying for a certificate of authority to act as a motor club in this state shall demonstrate to the satisfaction of the commissioner that such club has a net worth of not less than two hundred fifty thousand dollars ($250,000). For the purposes of Sections 12162.5 and 12162.6, net worth is defined as the excess of total assets over total liabilities. Such net worth shall be maintained at all times as a condition for the continuance of its certificate of authority to act as a motor club in this state.

history: (History: Amended by Stats. 1992, Ch. 15, Sec. 1. Effective January 1, 1993.)


text:
(a) A motor club holding a certificate of authority to act as a motor club granted prior to January 1, 1992, may continue to retain the certificate until July 1, 1996, without complying with the increased minimum net worth requirement of Section 12162.5.

(b) A motor club shall be deemed to be insolvent and subject to Section 12164 proceedings whenever its net worth is less than two hundred fifty thousand dollars ($250,000) and it fails to comply with one of these two conditions:

(1) An audit by an independent certified public accountant with an audit report prepared by the certified public accountant and filed with the commissioner no later than June 30 of the year following the year covered by the audit.

(2) A demonstration to the satisfaction of the commissioner, on a quarterly basis, of an amount of liquid assets sufficient to satisfy its current liabilities to members.

history: (History: Amended by Stats. 1992, Ch. 15, Sec. 2. Effective January 1, 1993.)


text: For purposes of this article, “liquid assets” means cash, cash equivalents, and marketable securities readily convertible into cash. Liquid assets also include bonds, stocks, certificates of deposit, negotiable short-term instruments, service members’ dues receivable not over 90 days, receivables due from affiliates not over 90 days, acquisition costs deferred not over 90 days, federal income tax recoverables, and interest and dividends due and accrued.

history: (History: Added by Stats. 1992, Ch. 15, Sec. 3. Effective January 1, 1993.)


text: If any portion of the audit report required by paragraph (1) of subdivision (b) of Section 12162.6 includes a qualified opinion as to the financial condition of the motor club or its ability to exist as a going concern, the motor club shall be considered materially deficient under Section 717, and subject to Section 12164. Similarly, if a motor club qualifying under paragraph (2) of subdivision (b) of Section 12162.6 fails to demonstrate to the commissioner an amount of liquid assets sufficient to satisfy its current liabilities to members, it shall be considered materially deficient under Section 717 and subject to Section 12164.

history: (History: Added by Stats. 1992, Ch. 15, Sec. 4. Effective January 1, 1993.)


text:
(a) The security required by subdivision (b) of Section 12162 shall thereafter be continuously maintained by a motor club in one of the forms prescribed. Failure of a motor club so to maintain the same shall be cause for revoking its certificate of authority.

(b) Such security shall be for the protection, use, and benefit of all persons whose applications for membership in a motor club have been accepted by such club or its representative and of this state as respects fees, fines, penalties, and taxes. Such security shall be subject to the following conditions, and, if a bond, shall be expressly so conditioned:

1. The club shall faithfully furnish and render to all persons whose applications for membership have been accepted any and all of the motor club benefits and services sold or offered for sale by it.

2. The club will faithfully conform to all provisions of law of the state pertaining to the sale and rendering of “motor club service” as defined and provided in Part 5 (commencing with Section 12140) of Division 2 of this code.

3. The club will promptly pay all fees, fines, penalties, and taxes which may be levied against it under authority of law.

4. If the club ceases to do business in this state as a motor club, it shall comply with the appropriate withdrawal procedure.

(c) Any person defrauded or injured by any wrongful act, misrepresentation, or failure on the part of the club with respect to the selling or rendering of any of its benefits or services may bring suit on the bond, if the security be a bond, in his own name. The commissioner may bring suit on such bond. If the security be a deposit of securities, any such a person or the commissioner may levy upon the same in execution of a judgment.


text:
(a) The commissioner may revoke or suspend the certificate of authority of a motor club whenever, after a hearing in accordance with the procedure provided in Section 701, he finds that any of the following circumstances exist:

1. The club has violated any provision of this part.

2. It or its officers refuse to submit to an examination, as provided for in Section 12169.

3. It is transacting business fraudulently.

4. It is no longer able to qualify for issuance to it of a certificate of authority as a motor club.

(b) The commissioner may give notice of such revocation or suspension to the public in such manner as he deems proper.

(c) All of the provisions of Article 14 (commencing with Section 1010) of Chapter 1 of Part 2 of Division 1 of this code not inconsistent with this part shall apply to motor clubs.

For the purpose of this part, “insolvency” means that a club’s assets are less than its liabilities.


text:
Subject to the annual fee provisions herein, every certificate of authority issued or held under this part shall be for an indefinite term and, unless sooner revoked by the commissioner, shall terminate upon occurrence of any of the following:

(a) Upon the holder’s ceasing to exist as a separate entity.

(b) Upon the winding up, or dissolution, or expiration, or forfeiture of the holder’s corporate existence.

(c) Upon completion of the withdrawal procedure prescribed by Article 15 (commencing with Section 1070) of Chapter 1 of Part 2 of Division 1 of this code and surrender by the holder of its certificate of authority and cancellation of the same by the commissioner. All provisions of such article not inconsistent with this part shall apply.

(d) Upon the entry of a final court order in a proceeding under said Article 14 (commencing with Section 1010), Chapter 1 of Part 2 of Division 1 of this code.


text: Notwithstanding the preceding provisions for a certificate of authority of indefinite term, each holder of a certificate of authority under this chapter shall owe and pay in advance to the commissioner an annual fee of two hundred five dollars ($205) on account of that certificate of authority until its final termination or revocation. That fee shall be for annual periods commencing on July 1 of each year and ending on June 30 of each year and shall be due on each March 1 and shall be delinquent on and after each April 1.

history: (History: Amended by Stats. 2017, Ch. 534, Sec. 76. (AB 1699) Effective January 1, 2018.)


text: Qualification of a motor club for a certificate of authority under this part does not require prior qualification with the Secretary of State under the Corporations Code for an intrastate business, but the issuance to it of a certificate of authority under this part does not relieve such foreign applicant of any duty to qualify with the Secretary of State pursuant to the Corporations Code before transacting intrastate business in this state.


text: Annually on or before March 1 of each year, copies of any instruments making any changes in articles of incorporation, bylaws, and membership certificate or identification card or service contract required by this part to be filed with the application for admission shall be filed with the commissioner. In the case of articles of incorporation, an amendment or certificate of amendment shall be certified by the official custodian of the original as a true copy of the same on file in his or her office. Amended bylaws or other papers shall be certified by the corporation secretary over the corporate seal to be true copies of the same currently adopted. The commissioner shall require the payment of fifty dollars ($50) for each annual filing of amended documents or papers pursuant to this article.

history: (History: Amended by Stats. 2017, Ch. 534, Sec. 77. (AB 1699) Effective January 1, 2018.)


text:
(a) Whenever the commissioner has reasonable cause to believe that a motor club is insolvent or is transacting its business in a fraudulent manner, he may demand from the club a statement under oath setting forth its assets and liabilities. He may, for the purpose of verifying the correctness of such statement, examine the books and affairs of the club.

(b) If such statement is not furnished within 20 days from the time of such demand by the commissioner, or if, upon the examination of such records, the statement furnished or any record examined is found to contain any willful misstatement of fact, the expense of the examination shall be paid by the motor club.

(c) Whenever any foreign motor club applies for admission, the commissioner may make, or cause to be made by the motor club regulatory authority of its domiciliary state, an examination of the applicant’s motor club business and affairs. Whenever such an examination is made, all of the provisions of Article 4 (commencing with Section 730) Chapter 1 of Part 2 of Division 1 of this code not inconsistent with this part shall be applicable.


text: Motor clubs certificated on the effective date of this chapter shall not be required to be recertificated, but thereafter shall be subject to the provisions of this chapter and shall be issued continuous certificates of authority subject to the conditions provided in this chapter.


text: A service contract shall not be executed, issued or delivered in this State until the form thereof is approved in writing by the commissioner.

history: (History: Enacted by Stats. 1935, Ch. 145.)

chapter: 3. The Service Contract

path: 2. CLASSES OF INSURANCE > 5. MOTOR CLUBS > 3. The Service Contract


text: Every service contract executed, issued or delivered in this State shall be made in duplicate and shall be dated and signed by the motor club issuing it. Such contract shall be countersigned by a duly authorized agent of the club, and by the party purchasing the contract. One copy of the contract shall be kept by the club and the other copy shall be delivered to the purchasing party.


text:
A service contract shall not be executed, issued or delivered in this State unless it contains the following:

(a) The exact corporate or other name of the club.

(b) The exact location of its home office and of its usual place of business in this State, giving street number and city.

(c) A provision that the contract may be canceled at any time by either the club or the holder, and that the holder will, if he has actually paid the consideration, thereupon be entitled to the unused portion of the consideration paid for such contract, calculated on a pro rata basis over the period of the contract, without any deductions.

(d) A provision plainly specifying:

(1) The services promised.

(2) That the holder will not be required to pay any sum, in addition to the amount specified in the contract, for any services thus specified.

(3) The territory wherein such services are to be rendered.

(4) The date when such service will commence.

(e) A statement in not less than fourteen point modern type at the head of said contract stating, “This is not an insurance contract.”


text: A person shall not solicit or aid in the solicitation of another person to purchase a service contract issued by a club not having a certificate of authority procured pursuant to this part.


text: A club or an officer or agent thereof shall not in any manner misrepresent the terms, benefits or privileges of any service contract issued or to be issued by it.


text: Any service contract made, issued or delivered contrary to any provision of this part shall nevertheless be valid and binding on the club.


text:
Any motor club may elect not to execute, issue, or deliver service contracts in this state. A club may distribute brochures, prospectuses, or advertisements which are not contracts. Such materials may be issued or delivered without prior approval of the commissioner.

If a club does not use service contracts it shall execute, issue, and deliver membership cards, tokens, or other indicia of membership to its members.


text: A club agent doing business in this State shall not execute, issue or deliver any service contract to any person owning or operating motor vehicles without first obtaining a license from the commissioner.

chapter: 4. Agents

path: 2. CLASSES OF INSURANCE > 5. MOTOR CLUBS > 4. Agents


text:
(a) The fee for filing application for license as motor club agent is eighty-five dollars ($85).

(b) Property broker-agents, casualty broker-agents, personal lines broker-agents, and limited lines automobile insurance agents licensed under Chapter 5 (commencing with Section 1621) of Part 2 of Division 1 need not be licensed to act as motor club agents under this chapter.

(c) This section shall not permit a motor club agent to have a certificate of convenience nor a nonresident license, but shall require only club appointments, and shall not require the keeping of records or fiduciary accounts. Appropriate licenses and license applications may be prescribed by the commissioner.

history: (History: Amended by Stats. 2017, Ch. 534, Sec. 78. (AB 1699) Effective January 1, 2018.)


text: Without first obtaining such license, a club agent shall not collect or receive from any person, in advance of the execution, issuance or delivery of any such service contract, any money or other thing of value upon any promise or agreement to execute, issue or deliver any such service contract.


text: Any person violating any provisions of this part is guilty of a misdemeanor.

history: (History: Amended by Stats. 1971, Ch. 163.)

chapter: 5. Penalties

path: 2. CLASSES OF INSURANCE > 5. MOTOR CLUBS > 5. Penalties


text: The definitions set forth in this article shall govern the construction of the terms used in this chapter, but shall not affect any other provisions of this code.

history: (History: Repealed and added by Stats. 1973, Ch. 1130.)

part: 6. INSURANCE COVERING LAND

chapter: 1. Title Insurance

article: 1. Definitions

path: 2. CLASSES OF INSURANCE > 6. INSURANCE COVERING LAND > 1. Title Insurance > 1. Definitions


text:
“Title insurance” means insuring, guaranteeing or indemnifying owners of real or personal property or the holders of liens or encumbrances thereon or others interested therein against loss or damage suffered by reason of:

(a) Liens or encumbrances on, or defects in the title to said property;

(b) Invalidity or unenforceability of any liens or encumbrances thereon; or

(c) Incorrectness of searches relating to the title to real or personal property.

history: (History: Added by Stats. 1973, Ch. 1130.)

article: 1. Definitions


text: “Title policy” means any written instrument or contract by means of which title insurance liability is assumed.

article: 1. Definitions


text:
“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 including but not limited to the handling of any escrow, settlement or closing in connection therewith; or the doing of or proposing to do any business, which is in substance the equivalent of any of the above.

(d) 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.

(e) 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.

history: (History: Amended by Stats. 1981, Ch. 479, Sec. 1.)

article: 1. Definitions


text:
“Title insurer” means any company issuing title policies as insurer, guarantor or indemnitor.

“Domestic title insurer” means any title insurer organized under the laws of this state.

“Foreign title insurer” means any title insurer organized under the laws of any other jurisdiction.

article: 1. Definitions


text: “Underwritten title company” means any corporation engaged in the business of preparing title searches, title examinations, title reports, certificates or abstracts of title upon the basis of which a title insurer writes title policies.

article: 1. Definitions


text:
(a) “Controlled escrow company” means any person, other than a title insurer or underwritten title company, whose principal business is the handling of escrows of real property transactions in connection with which title policies are issued, which person, if an artificial person, directly or indirectly, is controlled by, controls, or is under common control with a title insurer, or controls, is controlled by, or is under common control with an underwritten title company, or, if a natural person, is employed by, or controlled by, a title insurer or by an underwritten title company. As used in this section, the term “control” has the meaning set forth in subdivision (c) of Section 1215.

(b) Except for Article 6 (commencing with Section 12404), this section does not apply to any person or entity doing business under any law of this state or the United States relating to banks or savings and loan associations.

history: (History: Amended by Stats. 2017, Ch. 417, Sec. 31. (AB 1696) Effective January 1, 2018.)

article: 1. Definitions


text: Except as provided in Section 12401.8, and excluding miscellaneous charges, “rate” or “rates” means the charge or charges, whether denominated premium or otherwise, made to the public by a title insurer, an underwritten title company or a controlled escrow company, for all services it performs in transacting the business of title insurance. As used in this section miscellaneous charges means conveyancing fees, notary fees, inspection fees, tax service contract fees and such other fees as the commissioner by regulation may prescribe.

article: 1. Definitions


text: “Advisory organization” means every person or entity (other than a title insurer, underwritten title company, or controlled escrow company) which recommends or prepares policy forms or endorsements, or procedural manuals (but not including the making of rates, rating plans, or rating systems), or which collects and furnishes to its members or insurance supervisory officials loss and expense statistics or other statistical information and data relating to the business of title insurance and who otherwise acts in an advisory, as distinguished from a ratemaking, capacity. No duly authorized attorney at law acting in the usual course of his profession nor any entity engaging in the above activity on a nationwide basis shall be deemed to be an advisory organization.

history: (History: Amended by Stats. 1992, Ch. 991, Sec. 1. Effective January 1, 1993.)

article: 1. Definitions


text: “Willful” or “willfully” in relation to an act or omission which constitutes a violation of this chapter means with actual knowledge or belief that such act or omission constitutes such violation and with specific intent to commit such violation.

article: 1. Definitions


text: “Abstract of title” is a written representation, provided pursuant to a contract, whether written or oral, intended to be relied upon by the person who has contracted for the receipt of such representation, listing all recorded conveyances, instruments or documents which, under the laws of this state, impart constructive notice with respect to the chain of title to the real property described therein. An abstract of title is not a title policy as defined in Section 12340.2.

history: (History: Added by Stats. 1981, Ch. 55, Sec. 1.)

article: 1. Definitions


text: “Preliminary report”, “commitment”, or “binder” are reports furnished in connection with an application for title insurance and are offers to issue a title policy subject to the stated exceptions set forth in the reports and such other matters as may be incorporated by reference therein. The reports are not abstracts of title, nor are any of the rights, duties or responsibilities applicable to the preparation and issuance of an abstract of title applicable to the issuance of any report. Any such report shall not be construed as, nor constitute, a representation as to the condition of title to real property, but shall constitute a statement of the terms and conditions upon which the issuer is willing to issue its title policy, if such offer is accepted.

history: (History: Added by Stats. 1981, Ch. 55, Sec. 2.)

article: 1. Definitions


text: “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 conducting escrow services.

history: (History: Added by Stats. 2015, Ch. 370, Sec. 1. (AB 704) Effective January 1, 2016.)

article: 1. Definitions


text: For purposes of this chapter, “holders of liens or encumbrances” includes, but is not limited to, the institutional third parties described in Sections 1452 and 1717 of Title 12 of the United States Code.

history: (History: Added by Stats. 1995, Ch. 433, Sec. 1. Effective January 1, 1996.)

article: 1. Definitions


text: Every title insurer, before issuing any policy, shall deposit $100,000 with the Insurance Commissioner or other designated official of its home State as a “guarantee fund” for the security and protection of the holders of, or beneficiaries under, its title policies.

history: (History: Amended by Stats. 1935, Ch. 292.)

path: 2. CLASSES OF INSURANCE > 6. INSURANCE COVERING LAND > 1. Title Insurance > 2. Title Insurers; Capital and Guarantee Fund Requirements


text: Any such deposit may be made either in lawful money of the United States or in any of the securities, other than collateral trust bonds or notes, authorized for investment, other than excess funds investments, of all the assets of domestic incorporated insurers.

article: 2. Title Insurers; Capital and Guarantee Fund Requirements


text: If the deposit is made in this state, it shall first be approved by the commissioner who shall make a special deposit thereof in the State Treasury, for the purpose specified in Section 12350. The Treasurer shall give his or her receipt therefor, to the commissioner.

history: (History: Amended by Stats. 2011, Ch. 426, Sec. 12. (SB 712) Effective January 1, 2012.)


text: Except as provided in section 12355, assets in such deposits in this State may, with the approval of the commissioner, be withdrawn or exchanged from time to time for other assets of like character and value.


text: As long as the depositing insurer continues solvent, it shall receive the interest and dividends on any assets in the deposit.


text: Except on withdrawal of the insurer from this State, or substitution pursuant to section 12353, assets in the deposit in this State shall be subject to final sale, transfer, and disposal of the proceeds thereof by the commissioner only on the order of a court of competent jurisdiction and for the security and protection of the holders of, or beneficiaries under, the depositing insurers title insurance policies.


text:
When any part of the assets to be deposited in this State consists of mortgage-secured notes or bonds, or loans upon real property secured by mortgage, such mortgages shall be accompanied by a policy of mortgage insurance issued under the provisions of this code, or by evidence of title issued by a person designated or approved by the commissioner and either authorized by law or found by the commissioner to be competent to issue such evidence. Such evidence of title shall consist either of a full abstract of title, a full certificate of title, or a policy of title insurance, and shall be assigned and approved by, or under the direction of, the commissioner.

In any case where he ascertains that the expense thereof would not be unreasonable or such as to make the deposit impracticable, the commissioner may require a policy of title insurance or a guaranty that the abstract is correct and that it shows title to be in the proper party, issued by a corporation authorized to issue such policies or guaranties.

history: (History: Amended by Stats. 1937, Ch. 732.)


text: Unless the mortgage is covered by mortgage insurance, the value of the property covered by each such mortgage constituting all or part of such deposit in this State shall be appraised by one or more appraisers selected or approved by the commissioner. The appraisers shall be familiar with property values of the particular type of property and generally in the region in which the property or some part thereof is situated.


text: The reasonable cost of examining such evidence of title and of making such appraisement, shall be paid by the title insurer making the deposit.


text: A title insurer shall not transact any insurance in this state unless it has paid-in capital represented by shares of stock of at least five hundred thousand dollars ($500,000).

history: (History: Amended by Stats. 1981, Ch. 479, Sec. 2.)


text: An insurer which anywhere in the United States transacts any class of insurance other than title insurance is not eligible for the issuance of a certificate of authority to transact title insurance in this State nor for the renewal thereof.

history: (History: Amended by Stats. 1951, Ch. 542.)


text: Every title insurer shall annually set apart a sum equal to 10 percent of its premiums collected during the year. Such sums shall be allowed to accumulate until a fund is created equal in amount to 25 percent of the aggregate of the subscribed capital stock of the insurer, or one million dollars ($1,000,000), whichever is the lower amount. After the establishment by a title insurer of an unearned premium reserve, pursuant to Article 3.5 (commencing with Section 12380) of this chapter, such amount shall be reduced by the aggregate amount which shall be set aside and maintained by such insurer in such unearned premium reserve. Such fund shall be known as the “title insurance surplus fund.”

history: (History: Amended by Stats. 1971, Ch. 1318.)

path: 2. CLASSES OF INSURANCE > 6. INSURANCE COVERING LAND > 1. Title Insurance > 3. Title Insurers: Finances and Investments


text: The title insurance surplus fund shall be maintained as a further security to holders and beneficiaries of the title policies issued by the insurer. If all or any part of the fund shall at any time be in excess of the amount required by Section 12370, such excess may be transferred by the insurer to its general assets. If at any time the fund is impaired by reason of a loss, the amount by which it is impaired shall be restored in the manner provided for its accumulation. The reporting of a loss is an impairment of such fund for the purposes of this section.

history: (History: Amended by Stats. 1965, Ch. 272.)

article: 3. Title Insurers: Finances and Investments


text:
Any such domestic insurer, after having its required capital paid in and depositing its required guarantee fund with the State Treasurer, may invest its funds in the preparation and purchase of materials and plant necessary to enable it to engage in the title insurance business. In all statements and proceedings required by law for the ascertainment and determination of the condition of such insurer, such materials and plant shall be treated in one of the following ways:

(a) They may be treated as an asset, valued at actual cost to the insurer not in excess of 50 per cent of the aggregate par value of the shares of the insurer’s capital stock then issued outstanding, and apportioned to its title insurance department, including treasury shares;

(b) They may be treated as an asset, at such lesser value than that permitted by paragraph (a) of this section as the insurer estimates;

(c) They may be omitted entirely from the statement or proceeding.

history: (History: Amended by Stats. 1939, Ch. 325.)


text: Notwithstanding the provisions of Section 12372, where a title plant is not being currently maintained, the asset value of such plant shall not exceed its asset value as of the last annual statement date preceding the first month such plant is not currently maintained, less 110th thereof for each succeeding year or part thereof that such 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 (1) the owner thereof continues regularly to obtain and index title record data to such plant or to a continuation thereof in a format other than that previously used, including, but not limited to, computerization of such data, or (2) the owner thereof is a participant, in an arrangement for joint use of a title plant system regularly maintained in any format, provided such owner is contractually entitled to receive a copy of the title record data contained in such jointly used title plant system during the period of such owner’s participation therein, either periodically or upon termination of such participation, at a cost not to exceed the actual cost of duplication of such title record data.

history: (History: Added by Stats. 1978, Ch. 846.)


text:
A title insurer shall not make any dividends except from profits remaining on hand after retaining unimpaired assets aggregating in value an amount equal to the sum of the following:

(a) The aggregate par value of the shares of its capital stock issued and outstanding, including treasury shares;

(b) The amount required to be set apart as the title insurance surplus fund;

(c) The amount required to be maintained in the unearned premium reserve;

(d) The amount required to be maintained in the reserve for unpaid losses and loss adjustment expense;

(e) A sum sufficient to pay all liabilities for expenses and taxes and all other indebtedness.


text: Except as otherwise authorized by subdivision (g) of Section 1105, a title insurer shall not directly or indirectly make a loan from its assets to any of its officers, directors or employees, or to any member of the family of any officer or director. Any officer, director, agent, or employee of any such insurer who knowingly consents to any violation of this section is guilty of a misdemeanor.

history: (History: Amended by Stats. 1981, Ch. 55, Sec. 3.)


text: Whenever a title insurer, upon withdrawing from insurance business in this State, desires to reinsure its policies with a title insurer whose “title insurance surplus fund” is not fully made up, the commissioner may require the reinsurer to increase its “title insurance surplus fund.” The amount of increase shall not be greater than the amount in the withdrawing insurer’s “title insurance surplus fund” nor greater than will fully make up the reinsurer’s title insurance surplus fund. Such increase may be made a condition of the commissioner’s approval of the reinsurance plan.

history: (History: Enacted by Stats. 1935, Ch. 145.)


text:
(a) If an underwritten title company is placed into bankruptcy, receivership, or conservation by the commissioner, each title insurer operating under an underwriting agreement with the underwritten title company during the six months prior to the earliest of the conservation, bankruptcy, or receivership shall be liable for its proportionate share of the commissioner’s costs and any escrow and subescrow account shortages as determined by the calculations set forth in subdivisions (b) and (c).

(b) If, during the six months prior to the earliest of the establishment of a conservation, bankruptcy, or receivership under subdivision (a), the underwritten title company was authorized by underwriting agreements to issue title policies for more than one title insurer, the liability of each title insurer is determined by multiplying the amount of the total escrow and subescrow shortages, as well as the costs, and expenses, as set forth in subdivision (c), by that title insurer’s percentage of the underwritten title company’s net premiums for policies issued by each title insurer during the 12-month period preceding the earliest of the establishment of the conservation, bankruptcy, or receivership, with each title insurer’s liability pursuant to this subdivision to be referred to as its proportionate share.

(c) When determining the total proportionate liability of each title insurer, the commissioner shall include the following:

(1) The commissioner’s costs and expenses of seizing and taking control of the underwritten title company’s offices, operations, and assets.

(2) The commissioner’s costs and expenses of handling, adjusting, and closing all subescrow and escrow accounts, including the costs and expenses of determining whether shortages exist in any subescrow and escrow accounts.

(3) Other costs and expenses incurred by the commissioner in connection with borrowing from the Insurance Fund pursuant to subdivision (g) and foregone earnings or interest of the Insurance Fund resulting from the borrowing.

As used in this subdivision, “commissioner’s costs and expenses” includes the costs and expenses of all agents and contractors retained by the commissioner in performing functions set forth in this subdivision, and “subescrow” and “escrow” means title subescrows and escrows. These calculations shall result in 100 percent of the shortage, costs, and expenses being proportionately allocated to each title insurer authorized to issue title policies in the last six months preceding the underwritten title company being placed into bankruptcy, receivership, or conservation.

(d) (1) The commissioner shall make an initial estimate of the total shortage in the escrow and subescrow accounts and the commissioner’s costs and expenses as provided in subdivision (c) and shall provide this estimate in writing to each title insurer determined to have liability under this section as soon as practicable. The initial estimate shall be substantiated by a summary of the accounting information pertinent to the commissioner’s estimate of the escrow and subescrow shortfalls and the commissioner’s costs and expenses.

(2) The commissioner shall make further estimates, as necessary, of the total shortage in the escrow and subescrow accounts and the commissioner’s costs and expenses as provided in subdivision (c) and shall provide the estimates in writing to each title insurer determined to have liability under this section. These estimates shall be substantiated by a detailed summary of pertinent accounting information.

(3) After receiving an estimate pursuant to paragraphs (1) and (2), each title insurer having liability under this section shall, within 30 days after written notification, deposit its proportionate share of the shortage, costs, and expenses into an escrow account established by the commissioner for the purpose of reimbursement to subescrow or escrow accountholders, reimbursement to the commissioner in the event that the commissioner advances or has advanced payments to subescrow or escrow accountholders, or payment or reimbursement of the commissioner’s costs and expenses pursuant to subdivision (c). If a title insurer fails to make a payment required by this subdivision within the 30-day period, the title insurer shall pay a penalty calculated at the rate of 10 percent per annum on the unpaid amount until the payment is received by the commissioner.

(e) Nothing in this section relieves a person of liability under any other provision of law that he or she may have for a shortage as set forth in subdivision (a). A title insurer, on becoming liable for a shortage as set forth in this section, is entitled to enforce every available remedy, or bring any cause of action that would have been available to a person compensated by the title insurer.

(f) A title insurer shall be entitled to make a claim for reimbursement for subescrow or escrow shortages paid to subescrow or escrow accountholders and for payments of its proportionate share pursuant to subdivision (c). Those claims shall be given the same preference as those claims referenced in paragraph (2) of subdivision (a) of Section 1033.

(g) A title insurer shall be entitled to make a claim for reimbursement for payment of its proportionate share of the commissioner’s costs and expenses paid pursuant to subdivision (c). Those claims shall be given the same preference as those claims referenced in paragraph (2) of subdivision (a) of Section 1033. The commissioner shall return to each title insurer its proportional share of any funds remaining in the escrow account after all liabilities in subdivision (a) have been satisfied.

(h) In order to minimize potential losses and negative impacts on consumers having money in escrow accounts held by an underwritten title company taken into conservation, bankruptcy, or receivership by the commissioner, the commissioner shall hire all necessary escrow consultants or other experts necessary to achieve this goal.

(i) The commissioner may borrow from the Insurance Fund to cover shortages in subescrow or escrow accounts and to pay costs and expenses set forth in subdivision (c).

history: (History: Amended by Stats. 2002, Ch. 899, Sec. 3. Effective January 1, 2003.)


text:
(a) All escrow funds received by an underwritten title company that are subject to Section 12413.5 shall not be considered part of the estate of the underwritten title company for purposes of liquidation, receivership, bankruptcy, or conservation pursuant to Article 14 (commencing with Section 1010) of Chapter 1 of Part 2 of Division 1.

(b) Where an underwritten title company is placed into conservation, receivership, or bankruptcy and the escrow accounts held by the company are found to have shortages, the department, conservator, liquidator, receiver, or bankruptcy trustee shall do everything reasonably possible to trace these moneys to other depository accounts or assets.

(c) Any real or personal property traceable to shortages in the escrow accounts shall not be considered part of the estate available to other claimants under Section 1033. Those assets shall be liquidated and paid in the following order: (1) if the commissioner has paid or advanced funds to subescrow or escrow accountholders from sources other than the escrow established pursuant to subdivision (c) of Section 12376, they shall be paid to the commissioner to the extent that the commissioner has not been repaid by title insurers having liability under Section 12376, (2) they shall be deposited into an escrow established pursuant to subdivision (c) of Section 12376, and (3) they shall be directly reimbursed to the title insurer or insurers that have reimbursed escrow depositors under Section 12376. In no event shall a title insurer be reimbursed an amount in excess of its liability as determined in Section 12376.

history: (History: Amended by Stats. 2002, Ch. 899, Sec. 4. Effective January 1, 2003.)


text:
Unless the provision or context otherwise requires, the following definitions govern the construction of this article:

(a) “Total charges for policies of title insurance” means (i) the total of fees and charges as shown on policies, as required by Section 12412, less any amount paid for coinsurance of such policy to any coinsuring title insurer and (ii) the total sum charged by any coinsuring title insurer for acting as a coinsurer in respect to any policy of title insurance.

(b) “Ceding company” means a title insurer which shall have purchased a policy or contract of reinsurance from a reinsuring company.

(c) “Reinsuring company” means a title insurer which shall have sold a policy or contract of reinsurance to a ceding company.

(d) “Unearned premium reserve” means that reserve that is generally known as the statutory premium reserve.

history: (History: Amended by Stats. 1993, Ch. 974, Sec. 7. Effective January 1, 1994.)

path: 2. CLASSES OF INSURANCE > 6. INSURANCE COVERING LAND > 1. Title Insurance > 3.5. Unearned Premium Reserve and Reserve for Unpaid Losses and Loss Expense


text:
Every domestic title insurer shall, in addition to other reserves, establish and maintain a reserve to be known as the “unearned premium reserve” for title insurance, which shall, at all times for all purposes, be deemed and shall constitute the unearned portion of premiums due or received on all of its business wherever transacted and shall be charged as a reserve liability of such title insurer in determining its financial condition. The unearned premium reserve shall be retained and held by such title insurer for the protection of the policyholders’ interest in policies which have not expired. Except as provided in Section 12385, assets equal to the amount of such reserve shall not be subject to distribution among depositors or other creditors or stockholders of such title insurer until all claims of holders of policies and contracts of title insurance of such title insurer have been paid in full and all liability on the policies or other contracts of title insurance, whether contingent or actual, has been discharged or lawfully reinsured. Income from the investment of all or any part of such reserve shall be the unrestricted property of the title insurer.

Every admitted foreign insurer shall maintain a like reserve under like conditions in respect to its California business.

history: (History: Added by Stats. 1965, Ch. 272.)

article: 3.5. Unearned Premium Reserve and Reserve for Unpaid Losses and Loss Expense


text:
The unearned premium reserve of every title insurer shall consist of:

(a) Such amount as would have been required to be set aside in said reserve on all policies or contracts of title insurance issued during the calendar years 1962, 1963 and 1964, if this article had been effective at and after the date that such policies or contracts were written, less the amount of withdrawals that would have been permitted if this article had been so effective; and

(b) The amount of all additions required to be made to such reserve by this article less the withdrawals therefrom permitted by this article.


text:
(a) Out of total charges for policies of title insurance, a title insurer shall add to and set aside in its unearned premium reserve commencing as of January 1, 1965, an amount equal to 2 percent of those total charges for policies of title insurance, which amount shall be deemed and shall constitute the unearned premiums due or received from all such policies or contracts. Except as otherwise provided in Section 12382.6, if any policy of title insurance shall be reinsured, the reinsuring company shall be required to set aside in its unearned premium reserve only that portion, if any, of that 2 percent as shall have not theretofore been set aside by the ceding company. This subdivision shall apply to policies issued and reinsured prior to January 1, 1988.

(b) Out of total charges for policies of title insurance, a title insurer shall add to and set aside in its unearned premium reserve, an amount equal to 212 percent of those total charges for policies of title insurance, which amount shall be deemed and shall constitute the unearned premiums due or received from all such policies or contracts. Except as otherwise provided in Section 12382.6, if any policy of title insurance shall be reinsured, the reinsurer shall be required to set aside in its unearned premium reserve only that portion, if any, of the 212 percent as shall have not theretofore been set aside by the ceding company. This subdivision shall apply to policies issued and reinsured on and after January 1, 1988, and prior to January 1, 1994.

(c) Out of total charges for policies of title insurance and, commencing no later than the year beginning January 1, 1994, a title insurer shall add to and set aside in its unearned premium reserve an amount equal to 412 percent of the sum of the following items, for all jurisdictions where the title insurer operates, set forth in the title insurer’s annual statement filed in this state:

(1) “Direct premiums written” as set forth in Schedule T.

(2) “Other income” as set forth in Schedule T.

(3) “Premiums written during year—reinsurance assumed” less “Premiums for reinsurance ceded during year.”

(d) The insurer shall calculate an adjusted unearned premium reserve as of December 31, 1993. The adjusted unearned premium reserve shall be calculated as if subdivision (c) of this section and subdivision (c) of Section 12382.5 had been in effect for all years beginning on or after January 1, 1974. For purposes of this calculation, the balance of the unearned premium reserve as of December 31, 1973, shall be deemed to be zero. If the adjusted unearned premium reserve so calculated exceeds the aggregate amount set aside for unearned premiums in the insurer’s December 31, 1993, Annual Statement (Form 9), the insurer shall, out of total charges for policies of title insurance, increase its unearned premium reserve by an amount that is not less than one-sixth of that excess in each of the succeeding six years, commencing no later than the year beginning January 1, 1994, until the entire excess has been added.

history: (History: Amended by Stats. 1994, Ch. 353, Sec. 1. Effective January 1, 1995.)


text: The aggregate amount set aside in the unearned premium reserve shall be separately recorded and reserved in respect to such policies and contracts issued in each calendar year. All amounts set aside as additions to the unearned premium reserve, to the extent that the same have not previously been deducted from net profits or earned surplus, shall be deducted in determining net profits of any title insurer.


text: For the purpose of determining the amounts of the unearned premium reserve that may be withdrawn pursuant to Section 12382.5 and the interest of the policyholders therein under Section 12385, all policies and contracts of title insurance or reinsurance shall be considered as dated on July 1 of the year of issue.


text:
(a) The aggregate of the amounts set aside in unearned premium reserve in any calendar year pursuant to subdivision (a) of Section 12382.2 shall be released from that reserve and restored to net profits pursuant to the following formula: one-tenth of that aggregate sum on July 1 of each of the five years next succeeding the year of addition to the reserve and one-thirtieth of that aggregate sum on July 1 of each succeeding year thereafter until the entire sum shall have been so released and restored to net profits. The aggregate of the amounts set aside in unearned premium reserve pursuant to subdivision (a) of Section 12382 shall be released from the reserve and restored to net profits and surplus pursuant to the foregoing formula, provided that the amounts so set aside shall be treated as if subdivision (a) of Section 12382 and this section had been effective during the calendar years 1962, 1963, and 1964.

(b) The aggregate of the amounts set aside in unearned premium reserve in any calendar year pursuant to subdivision (b) of Section 12382.2 shall be released from the reserve and restored to net profits pursuant to the following formula: one-tenth of the aggregate sum on July 1 of each of the 10 years next succeeding the year of addition to the reserve until the entire sum shall have been so released and restored to net profits.

(c) The aggregate of the amounts set aside in unearned premium reserve in any calendar year pursuant to subdivision (c) of Section 12382.2 shall be released from the reserve and restored to net profits over a period of 20 years pursuant to the following formula: 10 percent of the aggregate sum on July 1 of each of the five years next succeeding the year of addition; 9 percent of the aggregate sum on July 1 of each of the next succeeding five years; and one-half of 1 percent of the aggregate sum on July 1 of each of the last 10 years.

(d) The aggregate of the amounts set aside in unearned premium reserve in any calendar year as adjustments to the insurer’s unearned premium reserve pursuant to subdivision (d) of Section 12382.2 shall be released from the reserve and restored to net profits, or equity if the additions required by subdivision (d) of Section 12382.2 reduced equity directly, over a period not exceeding 10 years pursuant to the following table:Year of additionRelease1994, or earlierEqually over 10 years1995Equally over 9 years1996Equally over 8 years1997Equally over 7 years1998Equally over 6 years1999Equally over 5 years

history: (History: Amended by Stats. 1994, Ch. 353, Sec. 2. Effective January 1, 1995.)


text: If substantially the entire outstanding liability under all policies and contracts of title insurance or reinsurance of any ceding company shall be reinsured, pursuant to and as authorized by Section 12385, the total charge received by any reinsuring company authorized to transact the business of title insurance in this state shall constitute, in its entirety, unearned portions of original premiums, and shall be added to its unearned premium reserve and shall be deemed, for recovery purposes, to have been provided for liabilities assumed during the year of such reinsurance. The amount of such addition to the unearned premium reserve of such reinsuring company shall be not less than two-thirds (23rds) of the amount of the unearned premium reserve required to be maintained by the ceding company at the time of such reinsurance.


text: All amounts set aside in the unearned premium reserve of a title insurer shall be held either as cash on hand or shall be deposited or invested in those investments suitable for the investment of trust funds, as provided in Section 16040 of the Probate Code.

history: (History: Amended by Stats. 1999, Ch. 187, Sec. 1. Effective January 1, 2000.)


text: If the aggregate amount set aside by a title insurer in its unearned premium reserve should at any time be less than the amount required to be maintained in such reserve, and the deficiency shall not be promptly cured, such title insurer shall forthwith give written notice thereof to the commissioner. Any such title insurer shall not thereafter issue any further policies or contracts of title insurance or reinsurance until the deficiency shall have been eliminated and until it shall have received written approval from the commissioner authorizing it to again issue such policies and contracts of title insurance and reinsurance. For the purpose of determining the aggregate amount set aside by a title insurer in its unearned premium reserve, any portion of such reserve which shall have been invested shall be valued at the purchase price or the fair market value of such investment on the date that such investment was made.


text:
If a title insurer shall at any time become insolvent, be in the process of liquidation or dissolution or be in the possession of the commissioner, all amounts set aside in the unearned premium reserve shall be used and applied as follows:

(a) Such amount up to the whole of the reserve as is necessary may be used with the written approval of the commissioner to pay for reinsurance of the liability of such title insurer under all outstanding policies and contracts of title insurance or reinsurance as to which claims for losses by holders thereof are not then pending. The amount of the unearned premium reserve not so used shall be transferred to the general assets of the title insurer to be held and distributed subject to the limitations imposed by this section.

(b) The assets of a title insurer other than the unearned premium reserve shall be available to pay claims for losses sustained by holders of policies then pending or arising up to the time reinsurance is effected. In the event that claims for losses are in excess of such other assets of a title insurer, the excess of such claims, when established, shall be paid pro rata out of surplus assets attributable to the unearned premium reserve to the extent of such surplus, if any.


text: In the event that reinsurance is not obtained, as authorized by Section 12385, the unearned premium reserve and assets constituting the guarantee fund of the title insurer, or so much as remains thereof after outstanding claims have been paid, shall constitute a trust fund to be held by the commissioner for twenty (20) years, out of which claims of policyholders shall be paid as they arise. The balance, if any, of such fund shall, at the expiration of twenty (20) years, constitute general assets of the title insurer.


text:
Where a title insurer organized or incorporated under the laws of any state other than California does business in California, if the laws of the state of its domicile obligate such company to create and maintain an unearned premium reserve for purposes substantially similar to those of this article, any amounts required by the law of such state to be added to such reserve by reason of business done in California shall be deducted from any amounts required by this article to be set aside by such title insurer in an unearned premium reserve for its California business.

The provisions of this section shall be applicable only to title insurers organized or incorporated in those states whose laws provide that a title insurer organized and incorporated under the laws of California and which does business in such other state will be permitted a deduction substantially similar to that provided by this section with respect to any unearned premium reserve requirements for business done in that state.


text: Every title insurer shall, in addition to other reserves establish and maintain a reserve to be known as the “reserve for unpaid losses and loss adjustment expense”, which shall be used for the payment of losses incurred as a result of liability arising under policies of title insurance and the payment of adjustment expenses necessary for the settlement of or defense against claims of any such liability. Said reserve shall be in an amount equal to the sum of (1) the estimated amounts necessary to pay unpaid losses, plus (2) the estimated amounts of loss adjustment expense necessary to settle or defend against every claim presented pursuant to notice from or on behalf of every insured that may result in a loss to or cause expense to be incurred by a title insurer for the proper disposition of the claim. Every title insurer shall calculate such reserve by making a careful estimate in each year of the amounts anticipated to be reasonably necessary for both such purposes. The sum of the items so estimated shall be the total amount of the reserve for unpaid losses and loss adjustment expenses of such title insurer. The amounts so estimated may be revised from time to time as circumstances warrant and reduced by the amount of payments made, but shall be redetermined at least once each year. The amounts set aside in such reserve in any year shall be deducted in determining the net profits for such period of any title insurer.


text:
(a) On and after July 1, 2016, an underwritten title company as defined in Section 12340.5 that is a stock corporation 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 (2) conduct escrow services through business locations, as defined in Section 12340.13, in counties in which the underwritten title company is licensed to conduct escrow services regardless of the location of the real or personal property involved in the transaction.

(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 and a bond or cash deposit as follows:Aggregate number of documents recorded and documents filed in the preceding calendar year in all counties where the company is licensed to transact businessNumber of documentsAmount of required minimum net worthAmount of bond or cash depositLess than 50,000$ 75,000$ 50,00050,000 to 100,000120,00050,000100,000 to 500,000200,000100,000500,000 to 1,000,000300,000100,0001,000,000 or more400,000100,000(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, 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 eight hundred forty-nine dollars ($849). 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 four-hundred-ninety-four-dollar ($494) 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 (g). 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 seven hundred fifty dollars ($750).

(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 two hundred eighty-three dollars ($283) 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.

(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) It maintains a bond satisfactory to the commissioner in the amount set forth in subparagraph (A) of paragraph (2) of subdivision (b). The bond 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 under the provisions of this chapter.

(B) (i) In lieu of the bond described in subparagraph (A), the company may maintain a deposit in the amount set forth in subparagraph (A) of paragraph (2) of subdivision (b), and in a form permitted by Section 12351, with the commissioner, who shall immediately make a special deposit in that amount in the State Treasury. The deposit shall be subject to Sections 12353, 12356, 12357, and 12358. 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 security for the same beneficiaries and purposes as the bond, as set forth in subdivision (d). The deposit shall be maintained until four years after all escrows handled by the depositor have been closed.

(ii) The commissioner may release the deposit prior to the passage of the four-year period described in clause (i) upon presentation of evidence satisfactory to the commissioner of either a statutory merger of the depositor into a licensee subject to the jurisdiction of the commissioner, or a valid assumption agreement under which the liability of the depositor stemming from escrow transactions handled by it is assumed by a licensee subject to the jurisdiction of the commissioner.

(iii) With the foregoing exceptions, the deposit shall be returned to the depositor or lawful successor in interest following the four-year period described in clause (i) upon presentation of evidence satisfactory to the commissioner that there are no claims against the deposit arising out of escrow transactions handled by the depositor. If claims against the deposit are presented to the commissioner, the commissioner may pay a valid claim or claims until the deposit amount is exhausted. If the commissioner has evidence of one or more claims against the depositor, and the depositor is in conservatorship, bankruptcy, or liquidation proceedings, the commissioner may release the deposit to the conservator, trustee, or liquidator. If the depositor is not in conservatorship, bankruptcy, or liquidation, the commissioner may interplead the deposit by special endorsement to a court of competent jurisdiction for distribution to claimants on the deposit.

(d) (1) The bond provided by a surety insurer pursuant to subdivision (c) naming the underwritten title company as principal obligor or the letter of credit of an issuing bank shall be subject to the following conditions:

(A) The licensee shall faithfully conform to and abide by the provisions of this chapter and all of the rules made by the commissioner under this chapter concerning the conduct of escrow services.

(B) The licensee will honestly and faithfully apply all funds received, and will faithfully and honestly perform all obligations and undertakings under this chapter, concerning the conduct of escrow services.

(2) In determining the liability of the principal and the sureties under the bond, 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.

(3) 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 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 that payment the surety on the bond, or the issuing bank under a letter of credit shall be completely 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.

(4) 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, for good cause shown, may permit a letter of credit in lieu thereof, and in the amount of the bond or deposit required by this section. In that case, the commissioner may fashion the letter of credit requirements as appropriate to the circumstances and cause.

(e) (1) On and after July 1, 2016, the commissioner shall promptly release to the depositor, upon application, all escrow-related deposits previously made pursuant to paragraph (2) as that paragraph read on June 30, 2016, if any of the following occurs:

(A) The underwritten title company has provided to the commissioner bond coverage, a deposit, or an approved irrevocable letter of credit as set forth in this subdivision.

(B) 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.

(2) Otherwise, the deposit shall be promptly returned to the depositor, its duly appointed trustee in bankruptcy, or its lawful successor in interest upon application for release following the four-year period specified in paragraph (2) of subdivision (c) 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, 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.

(f) 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.

(g) (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.

(h) 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.

(i) 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 two hundred eighty-three dollars ($283). Each company shall be subject to Article 14 (commencing with Section 1010) and Article 14.5 (commencing with Section 1065.1) of Chapter 1 of Part 2 of Division 1.

(j) 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.

history: (History: Amended by Stats. 2017, Ch. 534, Sec. 79. (AB 1699) Effective January 1, 2018.)

article: 3.7. Underwritten Title Companies

path: 2. CLASSES OF INSURANCE > 6. INSURANCE COVERING LAND > 1. Title Insurance > 3.7. Underwritten Title Companies


text:
Before granting a license or a reissued license to act as an underwritten title company to any applicant, the commissioner shall consider the qualifications of the applicant in respect to the following subjects: (a) minimum net worth and working capital; (b) reasonableness of its plan of operation; (c) lawfulness and quality of investments; (d) financial stability; (e) competency, character, and integrity of management; (f) ownership and control of issued and outstanding shares; (g) fairness and honesty of methods of doing business; (h) method by which the applicant was promoted if any of its promoters remain as stockholders or in management; and (i) hazard to the public.

Upon consideration of all relevant qualifications, the commissioner shall issue or reissue a license to act as an underwritten title company to the applicant, unless the commissioner shall have made a finding, or findings, that the applicant is materially deficient in respect to one or more of the items outlined herein.

history: (History: Added by Stats. 1987, Ch. 417, Sec. 3.)

article: 3.7. Underwritten Title Companies


text: After the issuance or reissuance of a license to act as an underwritten title company, the holder shall continue to comply with the requirements as to its business set forth in Section 12389.1 and in the other applicable sections of this code, and in the other laws of this state.

history: (History: Added by Stats. 1987, Ch. 417, Sec. 4.)

article: 3.7. Underwritten Title Companies


text: When there exists a restriction in a stock certificate requiring the consent of the department prior to the transfer of the stock, the request for consent to transfer shall be submitted to the department for approval. Requests for consent to transfer stock certificates representing less than 10 percent of the outstanding stock of the company to existing stockholders, the company which issued the stock, or persons who have been employed by the underwritten title company for the preceding 12 months, shall be approved or denied by the department within 60 days of the request for consent to transfer. If no action is taken by the department within 60 days, the request for consent to transfer stock certificates shall be deemed approved. In no event may the 60-day period be extended or waived by the applicant or the department. The time limits set forth in this section shall not apply where the transfer of the stock would result in the transferee, other than the company which issued the stock, owning 10 percent or more of the outstanding stock of the company.

history: (History: Added by Stats. 1992, Ch. 991, Sec. 2. Effective January 1, 1993.)

article: 3.7. Underwritten Title Companies


text: An underwritten title company shall furnish a quarterly financial statement to the commissioner on forms prescribed by the commissioner on or before 30 days after each calendar quarter ending March 31, June 30, and September 30. Underwritten title companies that are specifically approved to report on a fiscal year basis shall file a quarterly financial statement 30 days after the end of each fiscal quarter. The commissioner is authorized to require an underwritten title company to provide supplemental accounting and financial information when the commissioner deems it to be necessary.

history: (History: Added by Stats. 1992, Ch. 991, Sec. 3. Effective January 1, 1993.)

article: 3.7. Underwritten Title Companies


text: Every person engaged in the business of preparing title searches, title examinations, title reports, and certificates of abstracts of title, upon which a title insurer writes title policies, is required to be licensed as an underwritten title company in compliance with the licensing requirements of this article.

history: (History: Added by Stats. 1995, Ch. 433, Sec. 2. Effective January 1, 1996.)

article: 3.7. Underwritten Title Companies


text:
(a) Prior to the disbursement by an underwritten title company from any escrow account under Section 12413.1, each underwriting agreement between the underwritten title company and a title insurer shall contain one of the following written procedures reasonably calculated to prevent the misappropriation, disappearance, or wrongful use of funds deposited in the underwritten title company’s escrow or subescrow account:

(1) The underwritten title company shall obtain and maintain a fidelity bond or insurance policy, satisfactory to the title insurer agreeing to this option that covers losses caused by misappropriation, disappearance, or other wrongful use of escrow funds deposited with the underwritten title company. The face amount of the fidelity bond or insurance policy shall be at least 10 times the underwritten title company’s required minimum net worth under subdivision (a) of Section 12389. The bond or insurance policy shall name as an additional insured, co-insured, or joint-loss payee each of the title insurers agreeing to this option in the underwriting agreement. The bond or policy may not exclude coverage due to acts or omissions of any officer, director, employee, or principal of the underwritten title company. In the event of cancellation or nonrenewal of the bond or policy, a title insurance company named as an additional insured, co-insured, or joint-loss payee shall be given advance written notice by the underwriter of the bond or policy. The underwritten title company shall submit a copy of the bond or policy to the title insurer named as an additional insured, co-insured, or joint-loss payee within 14 days of the effective date of the underwriting agreement.

(2) Disbursements of escrow funds shall be reviewed and approved by an employee of the title insurer. Title insurer employees who review and approve disbursements of escrow funds shall be physically located at the place of business of the underwritten title company and shall be on the title insurer’s payroll. Before review and approval of any disbursement, the employee shall sign an affidavit to be filed with and on a form approved by the commissioner. The affiant shall attest that the affiant has read, is familiar with, and agrees to comply with the title insurer’s approval procedures for disbursements.

(3) Account review processes and oversight and internal control guidelines, in electronic or other medium, drafted by a title insurance industry advisory organization, as defined in Section 12340.8, and approved by the commissioner.

(4) Written procedures approved by the commissioner that provide for the protection and control of escrow funds in a manner consistent with the purposes of this subdivision.

(b) The commissioner shall approve or deny any written procedures submitted to him or her under this section for approval within 60 days of receiving the request. If no action is taken by the commissioner within the 60-day period, the request is deemed approved.

history: (History: Added by Stats. 1995, Ch. 408, Sec. 2. Effective January 1, 1996.)

article: 3.7. Underwritten Title Companies


text:
(a) Sections 1070, 1070.5, 1070.6, 1071.5, 1072, and 1076 shall be applicable to underwritten title companies.

(b) The following terms from Sections 1070, 1070.5, 1070.6, 1071.5, 1072, and 1076 shall be applicable to underwritten title companies as follows:

(1) “Certificate of Authority” shall mean an underwritten title company license.

(2) “Insurer” shall mean an underwritten title company.

(3) “Reinsurer” shall mean a title underwriter or another underwritten title company.

(c) For the purposes of this section, Sections 1070, 1070.5, 1070.6, 1071.5, 1072, and 1076 shall be construed in accordance with the nature of underwritten title companies and the business of title insurance.

history: (History: Added by Stats. 2013, Ch. 321, Sec. 26. (AB 1391) Effective January 1, 2014.)

article: 3.7. Underwritten Title Companies