Maryland 2022 Regular Session

Maryland Senate Bill SB170 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1
2	2
3	3	EXPLANATION: CAPITALS INDICATE MAT TER ADDED TO EXISTIN G LAW.
4	4	[Brackets] indicate matter deleted from existing law.
5	5	sb0170
6	6
7	7	SENATE BILL 170
8	8	C4 2lr0010
9	9	(PRE–FILED)
10	10	By: Chair, Finance Committee (By Request – Departmental – Maryland Insurance
11	11	Administration)
12	12	Requested: October 4, 2021
13	13	Introduced and read first time: January 12, 2022
14	14	Assigned to: Finance
15	15
16	16	A BILL ENTITLED
17	17
18	18	AN ACT concerning 1
19	19
20	20	Title Insurance – Insurers and Insurance Producers – Requirements 2
21	21
22	22	FOR the purpose of altering certain requirements on title insurers relating to the review of 3
23	23	underwriting, claims, and escrow practices and policy–issuing processes of title 4
24	24	insurance producers appointed by the title insurers; altering the manner by which 5
25	25	title insurance producers are required to send a certain notice to the Maryland 6
26	26	Insurance Commissioner and any insurer with whom the title insurance producer 7
27	27	holds an appointment; and generally relating to title insurance. 8
28	28
29	29	BY repealing and reenacting, with amendments, 9
30	30	Article – Insurance 10
31	31	Section 10–121 11
32	32	Annotated Code of Maryland 12
33	33	(2017 Replacement Volume and 2021 Supplement) 13
34	34
35	35	SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 14
36	36	That the Laws of Maryland read as follows: 15
37	37
38	38	Article – Insurance 16
39	39
40	40	10–121. 17
41	41
42	42	(a) (1) In this section the following words have the meanings indicated. 18
43	43
44	44	(2) “Controlling person” means an individual who exercises day–to–day 19
45	45	direct control over the operation of a title agency doing business in the State, irrespective 20
46	46	of whether the person is an officer, a manager, or an owner. 21
47	47	2 SENATE BILL 170
48	48
49	49
50	50	(3) “Entity authorization” means a resolution or consent document 1
51	51	executed in accordance with the formalities and governing provisions of the particular 2
52	52	business entity and verified under oath. 3
53	53
54	54	(4) “Owner” means a person that individually, or through one or more 4
55	55	ownership tiers, ultimately holds a 10% or more equity interest in the business entity 5
56	56	applying for a title insurance producer license or renewal of a title insurance producer 6
57	57	license. 7
58	58
59	59	(5) “Title agency” has the meaning stated in § 10–125(a)(4) of this subtitle. 8
60	60
61	61	(6) “Trust money” means a deposit, a payment, or any other money that a 9
62	62	person entrusts to a licensed title insurance producer in connection with the provision of 10
63	63	escrow, closing, or real estate settlement services relating to property within the State. 11
64	64
65	65	(7) “Trust money controller” means a person within a title agency who has 12
66	66	day–to–day direct control over trust money. 13
67	67
68	68	(b) (1) Except as provided in paragraph (2) of this subsection, only a licensed 14
69	69	title insurance producer may exercise control over trust money. 15
70	70
71	71	(2) Paragraph (1) of this subsection does not apply to trust money that is 16
72	72	entrusted to: 17
73	73
74	74	(i) a law firm as defined in § 10–125 of this subtitle; or 18
75	75
76	76	(ii) a title insurer. 19
77	77
78	78	(c) A person may not convert or misappropriate money received or held in escrow 20
79	79	or trust while: 21
80	80
81	81	(1) acting as a title insurance producer; or 22
82	82
83	83	(2) providing any escrow, closing, or settlement services. 23
84	84
85	85	(d) (1) Each controlling person and each trust money controller shall hold a 24
86	86	license to act as a title insurance producer and, if applicable, an appointment with a title 25
87	87	insurer. 26
88	88
89	89	(2) If an applicant for a license is a business entity, the application shall be 27
90	90	accompanied by an entity authorization that: 28
91	91
92	92	(i) identifies each controlling person; 29
93	93
94	94	(ii) designates each person that will be a trust money controller for 30
95	95	the title agency; 31
96	96	SENATE BILL 170 3
97	97
98	98
99	99	(iii) identifies each owner; and 1
100	100
101	101	(iv) identifies each officer, director, manager, general partner, or 2
102	102	other person designated by the business entity to act as the business entity’s principal 3
103	103	contact with the Administration. 4
104	104
105	105	(3) When the application of a business entity for a license as a title 5
106	106	insurance producer is submitted, the Commissioner shall investigate the character of each 6
107	107	person identified as a controlling person and each person identified as a trust money 7
108	108	controller in the entity authorization included with the application. 8
109	109
110	110	(e) (1) In addition to meeting any of the applicable requirements for a license 9
111	111	to act as an insurance producer under this subtitle, a business entity applicant for a license 10
112	112	as a title insurance producer shall file with the Commissioner: 11
113	113
114	114	(i) a blanket fidelity bond covering appropriate employees and title 12
115	115	insurance producer independent contractors; and 13
116	116
117	117	(ii) 1. a blanket surety bond; or 14
118	118
119	119	2. a letter of credit. 15
120	120
121	121	(2) Unless the Commissioner approves a lesser amount, each bond or letter 16
122	122	of credit shall be for $150,000. 17
123	123
124	124	(3) The Commissioner may adopt regulations that specify when it is 18
125	125	appropriate for a bond or letter of credit to be less than $150,000. 19
126	126
127	127	(4) Notwithstanding paragraph (2) of this subsection, the Commissioner 20
128	128	may waive the requirement for a bond or letter of credit if the Commissioner finds that 21
129	129	bonds are not generally available or reasonably affordable. 22
130	130
131	131	(5) The Commissioner shall make a specific finding that states the reason 23
132	132	for accepting a bond or letter of credit for less than $150,000. 24
133	133
134	134	(f) (1) The surety bond or letter of credit shall be for the benefit of any person 25
135	135	that suffers a loss if the title insurance producer converts or misappropriates money 26
136	136	received or held in escrow or trust while: 27
137	137
138	138	(i) acting as a title insurance producer; or 28
139	139
140	140	(ii) providing any escrow, closing, or settlement services. 29
141	141
142	142	(2) The fidelity bond shall be for the benefit of the employer of the title 30
143	143	insurance producer who suffers any loss as described in paragraph (1) of this subsection. 31
144	144	4 SENATE BILL 170
145	145
146	146
147	147	(3) The total liability of the surety insurer under each bond or letter of 1
148	148	credit may not exceed $150,000. 2
149	149
150	150	(g) The title insurance producer shall file the bond or letter of credit with the 3
151	151	Commissioner: 4
152	152
153	153	(1) after the Commissioner notifies the title insurance producer of the 5
154	154	approval of the application for a license; and 6
155	155
156	156	(2) before the Commissioner issues the license. 7
157	157
158	158	(h) (1) Each bond or letter of credit shall remain in force until: 8
159	159
160	160	(i) the surety insurer is released from liability by the Commissioner; 9
161	161	or 10
162	162
163	163	(ii) the bond or letter of credit is canceled by the surety insurer. 11
164	164
165	165	(2) A surety insurer shall notify the title insurance producer and the 12
166	166	Commissioner at least 30 days before canceling a bond or letter of credit. 13
167	167
168	168	(3) If a surety insurer fails to notify the title insurance producer and the 14
169	169	Commissioner as required by paragraph (2) of this subsection, the bond or letter of credit 15
170	170	remains in effect until the surety insurer notifies the title insurance producer and the 16
171	171	Commissioner. 17
172	172
173	173	(4) A cancellation under this subsection does not affect any liability that 18
174	174	occurred during the life of the bond or letter of credit and before the date of cancellation. 19
175	175
176	176	(i) Before the Commissioner renews the license of a title insurance producer, the 20
177	177	title insurance producer shall submit satisfactory evidence of compliance with this section. 21
178	178
179	179	(j) (1) If a title insurance producer has been charged with a violation of this 22
180	180	section or this article that could result in suspension or revocation of the license of the title 23
181	181	insurance producer, the Commissioner may seek an immediate restraining order from a 24
182	182	circuit court to prohibit the title insurance producer from providing title insurance, escrow, 25
183	183	closing, or settlement services. 26
184	184
185	185	(2) A restraining order issued by a court under this subsection is effective 27
186	186	until: 28
187	187
188	188	(i) the court lifts the restraining order; or 29
189	189
190	190	(ii) the charges are dismissed or adjudicated. 30
191	191
192	192	(k) (1) (i) Except as provided in paragraph (5) of this subsection, the title 31
193	193	insurer shall during each calendar year conduct [an on–site] A review of the underwriting, 32 SENATE BILL 170 5
194	194
195	195
196	196	claims, and escrow practices of each title insurance producer appointed by the insurer as a 1
197	197	principal agent as designated in the title insurance agency contract between the insurer 2
198	198	and the producer. 3
199	199
200	200	(ii) The [on–site] review shall include a review of the title insurance 4
201	201	producer’s [or agency’s policy blank inventory and processing operations ] 5
202	202	POLICY–ISSUING PROCESSES . 6
203	203
204	204	(iii) If the title insurance producer or agency does not maintain 7
205	205	separate bank or trust accounts for each title insurer it represents, the title insurer shall 8
206	206	verify that the funds held on its behalf are reasonably ascertainable from the books of 9
207	207	account and records of the title insurance producer or agency. 10
208	208
209	209	(iv) Subject to the requirement under paragraph (3) of this 11
210	210	subsection to report suspected violations that the title insurer has reasonable cause to 12
211	211	believe have occurred, if the title insurance producer or title agency holds an appointment 13
212	212	with more than one title insurer, the title insurer may limit its review to files, separately 14
213	213	held accounts, and written documentation relating to its title insurance policies. 15
214	214
215	215	(2) (I) A written report setting forth the results of the [on–site] review 16
216	216	shall be prepared by the title insurer and is subject to examination under § 2–205 of this 17
217	217	article. 18
218	218
219	219	(II) THE REPORT SHALL BE S UBMITTED TO THE COMMISSIONER 19
220	220	ON A FORM CREATED BY THE COMMISSIONER AND IN T HE MANNER DIRECTED B Y 20
221	221	THE COMMISSIONER . 21
222	222
223	223	(3) If, as a result of the examination, a title insurer has reasonable cause 22
224	224	to believe that a title insurance producer or agency has engaged in any of the prohibited 23
225	225	activities set forth in § 10–126 of this subtitle, the title insurer shall report in writing the 24
226	226	suspected violation to the Commissioner and submit a copy of the examination. 25
227	227
228	228	(4) The examination required under this section is in addition to any 26
229	229	examination conducted by the Commissioner to determine compliance with the accounts 27
230	230	maintained for the benefit of the Maryland Affordable Housing Trust under § 22–105 of 28
231	231	this article. 29
232	232
233	233	(5) The title insurer is not required to perform the [on–site] review of a 30
234	234	title insurance producer for the calendar year during which the title insurance producer is 31
235	235	initially appointed if the appointment is made on or after June 30 of that calendar year. 32
236	236
237	237	(l) (1) A title insurance producer shall notify any title insurer with whom the 33
238	238	title insurance producer holds an appointment whenever a person licensed under this 34
239	239	subtitle becomes employed by, or associated with, the title insurance producer. 35
240	240	6 SENATE BILL 170
241	241
242	242
243	243	(2) The bonding requirements of this subtitle relating to title insurance 1
244	244	producers do not apply to an employee or officer of an authorized title insurer. 2
245	245
246	246	(m) (1) A title insurance producer shall notify the Commissioner, and any 3
247	247	insurer with whom the title insurance producer holds an appointment, if an individual 4
248	248	licensed under this subtitle leaves the employment of or ends an association with the title 5
249	249	insurance producer. 6
250	250
251	251	(2) The title insurance producer required to provide notice under this 7
252	252	subsection shall notify the Commissioner within 5 working days after the day the 8
253	253	individual leaves employment or ends the association. 9
254	254
255	255	(3) The notice required under this subsection shall be: 10
256	256
257	257	(i) in writing; and 11
258	258
259	259	(ii) sent [by certified mail or by electronic means in accordance with 12
260	260	§ 2–116 of this article] IN THE MANNER DESIGN ATED IN BULLETIN BY THE 13
261	261	COMMISSIONER . 14
262	262
263	263	(n) Notwithstanding subsections (e) and (g) of this section, a title insurance 15
264	264	producer independent contractor who provides escrow closing or settlement services that 16
265	265	may result in the issuance of a title insurance contract for or on behalf of a title insurance 17
266	266	producer is not required to file a blanket fidelity bond, blanket surety bond, or letter of 18
267	267	credit with the Commissioner. 19
268	268
269	269	(o) In addition to any requirements under this subtitle, title insurance producers 20
270	270	shall comply with this section. 21
271	271
272	272	(P) THE COMMISSIONER MAY ADOP T REGULATIONS TO CAR RY OUT THIS 22
273	273	SECTION. 23
274	274
275	275	SECTION 2. AND BE IT FURTHER ENACTED , That this Act shall take effect 24
276	276	October 1, 2022. 25