Business Plans - Title Insurance - Insurance - CA

Section § 12396

This section defines some key terms related to title insurance companies and their business practices. A "controlled business source" refers to related companies or affiliates involved with title insurers or escrow companies. A "license" is a permit allowing a company to operate in the field of title insurance. A "licensee" is the entity holding such a license. Title orders are considered to originate from a controlled business source when that source is part of the transaction, either directly or through agreements. These definitions are important for understanding the business operations and legal compliance of title companies.

(a) For purposes of this article, “controlled business source” means an affiliate, as defined in subdivision (a) of Section 1215, of any title insurer, controlled escrow company, or underwritten title company.

(b) For purposes of this article:

(1) “License” means a securities permit issued to a title insurance entity, a license to operate as an underwritten title company, or a certificate of authority to act as a title insurer.

(2) “Licensee” means the holder of a license.

(c) For purposes of this article, a title order shall be deemed to emanate from a controlled business source if the controlled business source is acting in the capacity of a principal, lender, representative, or agent of any of the parties to the transaction, or any other person or entity with which the reporting entity has an agreement, written or otherwise, whereby title orders are traded or otherwise exchanged in order to achieve compliance with this article.

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Section § 12397

If you want to apply for a license to sell title insurance in any county, you must show that you plan to actively compete in that area's market. If you don't provide this information, your license can be denied. Additionally, you need to prove that less than half of your closed title orders come from controlled business sources, which are businesses where you have influence or control.

Any applicant for a license shall indicate the applicant’s intent to actively compete in the marketplace for title insurance in each county in which the applicant seeks to or does conduct the business of title insurance. The failure to so indicate shall constitute grounds for denial of the license. Each applicant for a license shall also demonstrate that its plan of operation and intended course of business conduct will not involve reliance for more than 50 percent of its closed title orders from controlled business sources.

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Section § 12397.5

This law requires each title insurance licensee to submit reports to the Department of Insurance to show how they compete in each county they operate in. They need to keep records of where their title orders come from.

The competition is measured by the source of closed title orders and how they are working towards a specific competition goal. Every year, within 90 days of finishing their business year, licensees must file a verified report detailing the percent of closed title orders from controlled and non-controlled sources in each county. This report must be submitted to both the commissioner and any title insurer they have agreements with.

If a licensee's business from controlled sources is less than 5%, they can stop reporting, but if it rises above 5%, they must resume reporting. Title insurers must also confirm the report's accuracy, or note if it's insufficient.

(a) Each licensee shall make submissions as are required by the Department of Insurance to enable the department to determine the nature and extent of the licensee’s efforts to actively compete in each county in which it transacts its business. The licensee shall maintain records of its title orders sufficient to indicate the source of the title orders.

(b) Competitive behavior shall be measured by the source of closed title orders in each county in which the licensee engages in the title business and by the entity’s progress toward meeting the 50 percent objective specified in Section 12397, as indicated in the annual, verified report filed pursuant to subdivision (c).

(c) Within 90 days following the end of each business year, as established by the licensee, each licensee shall file with the commissioner, and any title insurer with which the licensee maintains an underwriting agreement, a verified report executed by the licensee’s chief executive officer or his or her designee under penalty of perjury, stating the percent of closed title orders for each county originating from controlled and noncontrolled business sources. Each title insurer that maintains an underwriting agreement with another licensee shall, within 30 days after receipt of this report, file with the commissioner a verified statement, signed by the licensee’s chief executive officer or by his or her designee under penalty of perjury, that the report is substantially correct or that insufficient information is contained in the report to enable an opinion to be formed concerning the correctness of the report.

(d) Upon receipt by the department of a verified statement, signed under penalty of perjury, that less than 5 percent of the business a licensee transacts emanates from controlled business sources, the licensee shall be relieved of further reporting under this article, but shall be subject to reporting under subdivision (c) at any time that 5 percent or more of the business which the licensee transacts emanates from controlled business sources.

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Section § 12398

If someone applying for or holding a license doesn't meet the rules set out in this article, they could have their application denied or their license suspended or canceled. The commissioner can also take other disciplinary actions following legal procedures.

The failure of an applicant or licensee to comply with any of the requirements of this article shall be grounds for the denial of an application for a license, the suspension or revocation of an issued license, or other disciplinary action determined by the commissioner, in accordance with procedures prescribed by law therefor.

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Section § 12399

This law states that unless specifically mentioned, nothing in this article will prevent or restrict the review or approval of a license application. Essentially, applications can still be considered or approved unless the article specifically says otherwise.

Nothing in this article shall limit or preclude the consideration or approval of an application for a license, except as expressly provided in this article.

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