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1. Preventive MeasuresProducer Licensing and Continuing Education – Like Maryland, many statesrequire producers selling title insurance to be licensed. A notable exception is NewYork. 25The District of Columbia just began to license title insurance producers in2010. 26 A bill that would have required title insurance producer licensure in Alabamafailed this year. 27However, Florida strengthened its licensing and continuing educationrequirements for title insurance producers by requiring attorney-owned title insuranceagencies to be licensed by the state. 28Also, Florida law requires that title insuranceproducers undergo mandatory, biennial continuing education on title insurance, ethics,and escrow management. 29Connecticut, New York and North Carolina are examples of states that, bycommon law, allow only attorneys to conduct real estate closings. Some argue that thislimitation helps to curb defalcations. However, the experience of several states,including Maryland, reveals that many title insurance producer agencies are owned andoperated by attorneys and there have been a number of defalcations by members of thebar. 30Examination and Audit Requirements – States have a range of requirementsregarding oversight of title insurance producers’ handling of escrow funds. On the more25 There is legislation pending in New York that would create a comprehensive state approach to titleinsurance, including the creation of a state title insurance fund and a title guaranty authority. New YorkAssembly Bill 2015/Senate Bill 2569; Senate Bill 3565/Assembly Bill 4168 (2011).26 D.C. CODE § 31-1131.03 (2012).27 State of Alabama, Senate Bill 460 (2012).28 FLA. STAT. § 626.8417 (2012).29 FLA. STAT. § 626.2815 (2012).30 See e.g., MIA v. Valeria Nolita Tomlin, MIA Case No. 2011-02-037 (Oct. 12, 2011); MIA v. John J.Dwyer, MIA Case No. 2011-01-028 (Jan. 28, 2011); MIA v. Yalonda Michelle Douglas, MIA Case No.2009-10-007 and 008 (Oct. 2, 2009).20
igorous end of the spectrum are those states, like Virginia, that require an independentaudit by a certified public accountant, which is reviewed by the state insuranceregulator. 31Other states, like Maryland and Missouri, require the underwriter to conductan annual audit of its authorized title insurance producers, and some states require stateregulators to conduct the audits. 32The thoroughness of audit procedures is critical to detecting the conditions thatmay lead to defalcations. Texas has specific audit requirements set forth in Section V ofthe Texas Basic Manual of Title Insurance. 33There are states that require monthlyreconciliation of accounts, while Texas requires monthly three-way reconciliation, whichinvolves a reconciliation of the bank balance, book balance, and escrow trial balance foreach escrow account. 34Other Mandated Business Practices – Additional preventive measures required bysome states include: (1) the establishment of a fiduciary trust account in which titleinsurance funds are segregated from other funds; (2) the disbursement of funds onlypursuant to written directions; and (3) specific record retention requirements. 352. Remedial MeasuresClosing Protection Letter (“CPL”) 36 – A CPL generally provides that theunderwriter will protect a lender from a loss resulting from negligence, fraud, ordishonesty by the underwriter’s appointed title insurance producer in the handling of the31 See e.g., 14 VA. ADMIN. CODE, § 5-395-50 (2002).32 MO. REV. STAT. § 381.023 (2011).33 The Texas’ Basic Manual of Title Insurance is available online athttp://www.tdi.texas.gov/title/titlem5a.html.34 28 TEX ADMIN. CODE § 9.1 (2009).35 NAIC Title Insurance Task Force, Survey of State Insurance Laws Regarding Title Data and TitleMatters, (Mar. 22, 2010).36 A closing protection letter is also known as an insured closing letter and is not part of the title insurancepolicy.21
Page 2 and 3: Report of the Study ofClosing or Se
Page 4 and 5: TABLE OF CONTENTSI. EXECUTIVE SUMMA
Page 6 and 7: Although in a minority of states an
Page 8 and 9: or misuse of closing or settlement
Page 10 and 11: (4) Division of Consumer Protection
Page 12 and 13: title insurance producer or agency
Page 14 and 15: As part of its Insurer Survey, the
Page 16 and 17: or dishonest practices, the underwr
Page 18 and 19: eported having a least one escrow a
Page 20 and 21: ond also may be purchased by an und
Page 22 and 23: 4. Other Protection Available to Un
Page 26 and 27: lender’s funds or documents. The
Page 28 and 29: In the event of the insolvency of a
Page 30 and 31: insurance task force. The informati
Page 32 and 33: in excess of 20 cents in claims on
Page 34 and 35: create an environment vulnerable to
Page 36 and 37: Appendix 1MARTIN O'MALLEY, Governor
Page 44 and 45: AppendixAppendix22MARTIN O’MALLEY
Page 46 and 47: Appendix 2c. If you answered “No
Page 48 and 49: Appendix 2Certification of Informat
Page 50 and 51: Appendix 2QUESTION #3Schedule BStat
Page 52 and 53: Appendix 3
Page 54 and 55: Appendix 3SURVEYTitle Insurance - C
Page 56 and 57: Appendix 3a. Does your title insura
Page 58 and 59: Appendix 3QUESTION # 2Schedule ADor
Page 60: Appendix 3QUESTION # 10Schedule CMi

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