EXPLANATION: CAPITALS INDICATE MAT TER ADDED TO EXISTIN G LAW.
[Brackets] indicate matter deleted from existing law.
*sb0170*
SENATE BILL 170
C4 2lr0010
(PRE–FILED)
By: Chair, Finance Committee (By Request – Departmental – Maryland Insurance
Administration)
Requested: October 4, 2021
Introduced and read first time: January 12, 2022
Assigned to: Finance
A BILL ENTITLED
AN ACT concerning 1
Title Insurance – Insurers and Insurance Producers – Requirements 2
FOR the purpose of altering certain requirements on title insurers relating to the review of 3
underwriting, claims, and escrow practices and policy–issuing processes of title 4
insurance producers appointed by the title insurers; altering the manner by which 5
title insurance producers are required to send a certain notice to the Maryland 6
Insurance Commissioner and any insurer with whom the title insurance producer 7
holds an appointment; and generally relating to title insurance. 8
BY repealing and reenacting, with amendments, 9
Article – Insurance 10
Section 10–121 11
Annotated Code of Maryland 12
(2017 Replacement Volume and 2021 Supplement) 13
SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 14
That the Laws of Maryland read as follows: 15
Article – Insurance 16
10–121. 17
(a) (1) In this section the following words have the meanings indicated. 18
(2) “Controlling person” means an individual who exercises day–to–day 19
direct control over the operation of a title agency doing business in the State, irrespective 20
of whether the person is an officer, a manager, or an owner. 21
2 SENATE BILL 170
(3) “Entity authorization” means a resolution or consent document 1
executed in accordance with the formalities and governing provisions of the particular 2
business entity and verified under oath. 3
(4) “Owner” means a person that individually, or through one or more 4
ownership tiers, ultimately holds a 10% or more equity interest in the business entity 5
applying for a title insurance producer license or renewal of a title insurance producer 6
license. 7
(5) “Title agency” has the meaning stated in § 10–125(a)(4) of this subtitle. 8
(6) “Trust money” means a deposit, a payment, or any other money that a 9
person entrusts to a licensed title insurance producer in connection with the provision of 10
escrow, closing, or real estate settlement services relating to property within the State. 11
(7) “Trust money controller” means a person within a title agency who has 12
day–to–day direct control over trust money. 13
(b) (1) Except as provided in paragraph (2) of this subsection, only a licensed 14
title insurance producer may exercise control over trust money. 15
(2) Paragraph (1) of this subsection does not apply to trust money that is 16
entrusted to: 17
(i) a law firm as defined in § 10–125 of this subtitle; or 18
(ii) a title insurer. 19
(c) A person may not convert or misappropriate money received or held in escrow 20
or trust while: 21
(1) acting as a title insurance producer; or 22
(2) providing any escrow, closing, or settlement services. 23
(d) (1) Each controlling person and each trust money controller shall hold a 24
license to act as a title insurance producer and, if applicable, an appointment with a title 25
insurer. 26
(2) If an applicant for a license is a business entity, the application shall be 27
accompanied by an entity authorization that: 28
(i) identifies each controlling person; 29
(ii) designates each person that will be a trust money controller for 30
the title agency; 31
SENATE BILL 170 3
(iii) identifies each owner; and 1
(iv) identifies each officer, director, manager, general partner, or 2
other person designated by the business entity to act as the business entity’s principal 3
contact with the Administration. 4
(3) When the application of a business entity for a license as a title 5
insurance producer is submitted, the Commissioner shall investigate the character of each 6
person identified as a controlling person and each person identified as a trust money 7
controller in the entity authorization included with the application. 8
(e) (1) In addition to meeting any of the applicable requirements for a license 9
to act as an insurance producer under this subtitle, a business entity applicant for a license 10
as a title insurance producer shall file with the Commissioner: 11
(i) a blanket fidelity bond covering appropriate employees and title 12
insurance producer independent contractors; and 13
(ii) 1. a blanket surety bond; or 14
2. a letter of credit. 15
(2) Unless the Commissioner approves a lesser amount, each bond or letter 16
of credit shall be for $150,000. 17
(3) The Commissioner may adopt regulations that specify when it is 18
appropriate for a bond or letter of credit to be less than $150,000. 19
(4) Notwithstanding paragraph (2) of this subsection, the Commissioner 20
may waive the requirement for a bond or letter of credit if the Commissioner finds that 21
bonds are not generally available or reasonably affordable. 22
(5) The Commissioner shall make a specific finding that states the reason 23
for accepting a bond or letter of credit for less than $150,000. 24
(f) (1) The surety bond or letter of credit shall be for the benefit of any person 25
that suffers a loss if the title insurance producer converts or misappropriates money 26
received or held in escrow or trust while: 27
(i) acting as a title insurance producer; or 28
(ii) providing any escrow, closing, or settlement services. 29
(2) The fidelity bond shall be for the benefit of the employer of the title 30
insurance producer who suffers any loss as described in paragraph (1) of this subsection. 31
4 SENATE BILL 170
(3) The total liability of the surety insurer under each bond or letter of 1
credit may not exceed $150,000. 2
(g) The title insurance producer shall file the bond or letter of credit with the 3
Commissioner: 4
(1) after the Commissioner notifies the title insurance producer of the 5
approval of the application for a license; and 6
(2) before the Commissioner issues the license. 7
(h) (1) Each bond or letter of credit shall remain in force until: 8
(i) the surety insurer is released from liability by the Commissioner; 9
or 10
(ii) the bond or letter of credit is canceled by the surety insurer. 11
(2) A surety insurer shall notify the title insurance producer and the 12
Commissioner at least 30 days before canceling a bond or letter of credit. 13
(3) If a surety insurer fails to notify the title insurance producer and the 14
Commissioner as required by paragraph (2) of this subsection, the bond or letter of credit 15
remains in effect until the surety insurer notifies the title insurance producer and the 16
Commissioner. 17
(4) A cancellation under this subsection does not affect any liability that 18
occurred during the life of the bond or letter of credit and before the date of cancellation. 19
(i) Before the Commissioner renews the license of a title insurance producer, the 20
title insurance producer shall submit satisfactory evidence of compliance with this section. 21
(j) (1) If a title insurance producer has been charged with a violation of this 22
section or this article that could result in suspension or revocation of the license of the title 23
insurance producer, the Commissioner may seek an immediate restraining order from a 24
circuit court to prohibit the title insurance producer from providing title insurance, escrow, 25
closing, or settlement services. 26
(2) A restraining order issued by a court under this subsection is effective 27
until: 28
(i) the court lifts the restraining order; or 29
(ii) the charges are dismissed or adjudicated. 30
(k) (1) (i) Except as provided in paragraph (5) of this subsection, the title 31
insurer shall during each calendar year conduct [an on–site] A review of the underwriting, 32 SENATE BILL 170 5
claims, and escrow practices of each title insurance producer appointed by the insurer as a 1
principal agent as designated in the title insurance agency contract between the insurer 2
and the producer. 3
(ii) The [on–site] review shall include a review of the title insurance 4
producer’s [or agency’s policy blank inventory and processing operations ] 5
POLICY–ISSUING PROCESSES . 6
(iii) If the title insurance producer or agency does not maintain 7
separate bank or trust accounts for each title insurer it represents, the title insurer shall 8
verify that the funds held on its behalf are reasonably ascertainable from the books of 9
account and records of the title insurance producer or agency. 10
(iv) Subject to the requirement under paragraph (3) of this 11
subsection to report suspected violations that the title insurer has reasonable cause to 12
believe have occurred, if the title insurance producer or title agency holds an appointment 13
with more than one title insurer, the title insurer may limit its review to files, separately 14
held accounts, and written documentation relating to its title insurance policies. 15
(2) (I) A written report setting forth the results of the [on–site] review 16
shall be prepared by the title insurer and is subject to examination under § 2–205 of this 17
article. 18
(II) THE REPORT SHALL BE S UBMITTED TO THE COMMISSIONER 19
ON A FORM CREATED BY THE COMMISSIONER AND IN T HE MANNER DIRECTED B Y 20
THE COMMISSIONER . 21
(3) If, as a result of the examination, a title insurer has reasonable cause 22
to believe that a title insurance producer or agency has engaged in any of the prohibited 23
activities set forth in § 10–126 of this subtitle, the title insurer shall report in writing the 24
suspected violation to the Commissioner and submit a copy of the examination. 25
(4) The examination required under this section is in addition to any 26
examination conducted by the Commissioner to determine compliance with the accounts 27
maintained for the benefit of the Maryland Affordable Housing Trust under § 22–105 of 28
this article. 29
(5) The title insurer is not required to perform the [on–site] review of a 30
title insurance producer for the calendar year during which the title insurance producer is 31
initially appointed if the appointment is made on or after June 30 of that calendar year. 32
(l) (1) A title insurance producer shall notify any title insurer with whom the 33
title insurance producer holds an appointment whenever a person licensed under this 34
subtitle becomes employed by, or associated with, the title insurance producer. 35
6 SENATE BILL 170
(2) The bonding requirements of this subtitle relating to title insurance 1
producers do not apply to an employee or officer of an authorized title insurer. 2
(m) (1) A title insurance producer shall notify the Commissioner, and any 3
insurer with whom the title insurance producer holds an appointment, if an individual 4
licensed under this subtitle leaves the employment of or ends an association with the title 5
insurance producer. 6
(2) The title insurance producer required to provide notice under this 7
subsection shall notify the Commissioner within 5 working days after the day the 8
individual leaves employment or ends the association. 9
(3) The notice required under this subsection shall be: 10
(i) in writing; and 11
(ii) sent [by certified mail or by electronic means in accordance with 12
§ 2–116 of this article] IN THE MANNER DESIGN ATED IN BULLETIN BY THE 13
COMMISSIONER . 14
(n) Notwithstanding subsections (e) and (g) of this section, a title insurance 15
producer independent contractor who provides escrow closing or settlement services that 16
may result in the issuance of a title insurance contract for or on behalf of a title insurance 17
producer is not required to file a blanket fidelity bond, blanket surety bond, or letter of 18
credit with the Commissioner. 19
(o) In addition to any requirements under this subtitle, title insurance producers 20
shall comply with this section. 21
(P) THE COMMISSIONER MAY ADOP T REGULATIONS TO CAR RY OUT THIS 22
SECTION. 23
SECTION 2. AND BE IT FURTHER ENACTED , That this Act shall take effect 24
October 1, 2022. 25