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.
Title InsuranceDefinitions
Section § 12340
This section explains that the definitions provided in this article are meant to clarify the meaning of terms used specifically in this chapter, but these definitions do not impact other parts of the insurance code.
definitions construction of terms specific chapter
Section § 12340.1
Title insurance is a type of protection for property owners or those with financial interest in a property. It covers losses or damages due to title problems like liens or defects, issues making liens unenforceable, or errors in title searches.
“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)CA Insurance Code § 12340.1(a) Liens or encumbrances on, or defects in the title to said property;
(b)CA Insurance Code § 12340.1(b) Invalidity or unenforceability of any liens or encumbrances thereon; or
(c)CA Insurance Code § 12340.1(c) Incorrectness of searches relating to the title to real or personal property.
title insurance property owners liens
Section § 12340.2
A "title policy" is a document or contract where a company agrees to be responsible for any problems with the ownership of a property.
“Title policy” means any written instrument or contract by means of which title insurance liability is assumed.
title policy definition title insurance liability written instrument
Section § 12340.3
The term 'business of title insurance' covers several activities related to title policies. These include issuing title policies, handling transactions like the negotiation or execution of title policies, and services linked to issuing title policies, such as managing escrow or settlement. It also involves issuing letters of indemnity, limited to protecting transactions involving an underwritten title company. Additionally, it includes providing statements that guarantee the proper fulfillment of closing services. Reasonable fees can be charged for indemnity letters and assurance statements, but specific rate or form filings are not required for these activities.
“Business of title insurance” includes:
(a)CA Insurance Code § 12340.3(a) Issuing or proposing to issue any title policy as insurer, guarantor, or indemnitor;
(b)CA Insurance Code § 12340.3(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)CA Insurance Code § 12340.3(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)CA Insurance Code § 12340.3(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)CA Insurance Code § 12340.3(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.
title insurance issuing title policy title policy transactions
Section § 12340.4
This section defines different types of title insurers. A 'title insurer' is a company that provides title insurance by issuing policies as an insurer or guarantor. A 'domestic title insurer' is one that is set up under California law, while a 'foreign title insurer' is established according to the laws of another state or country.
“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.
title insurer title policies guarantor
Section § 12340.5
An "underwritten title company" is a corporation that conducts research and analysis on property titles to help a title insurer create and issue title insurance policies.
“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.
underwritten title company title searches title examinations
Section § 12340.6
This law defines what a 'controlled escrow company' is. It's a business, not a title insurer or underwritten title company, that primarily manages real estate transaction escrows tied to title insurance policies. These companies are either controlled by or in control of title insurers or underwritten title companies, or they operate under common control with them. If it's an individual, they are employed by or controlled by a title insurer or underwritten company. The law also mentions that this definition doesn't apply to banks or savings and loan associations, except for specific exceptions starting with Section 12404.
(a)CA Insurance Code § 12340.6(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)CA Insurance Code § 12340.6(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.
controlled escrow company real property transactions title policies
Section § 12340.7
This law section defines "rate" or "rates" for title insurance. It refers to the charges set by title insurers, underwritten title companies, or controlled escrow companies for their services. It excludes certain fees like conveyancing, notary, inspection, and tax service contract fees, which are classified as miscellaneous charges.
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.
title insurance charges underwritten title company fees controlled escrow company rates
Section § 12340.8
This law defines an "advisory organization" in the context of title insurance. It refers to any person or entity that suggests or prepares policy forms, endorsements, or procedural manuals, but explicitly does not engage in setting rates or rating systems. These organizations collect and provide their members, or regulatory officials, with statistics related to losses and expenses in title insurance, serving in an advisory role rather than a rate-setting one. Attorneys practicing law as usual or entities operating nationwide in this capacity are not considered advisory organizations.
“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.
advisory organization title insurance policy forms
Section § 12340.9
This law defines 'willful' or 'willfully' as knowingly committing or failing to act in a way that violates the law, and doing so with the specific intention of breaking the law.
“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.
willful violation intent to commit violation actual knowledge
Section § 12340.10
An 'abstract of title' is a document listing all official records like deeds or legal papers that provide public notice about the history of ownership for a piece of real estate. This document is based on a contract and intended for the party who requested it. However, it is not the same as a title insurance policy, which is defined separately.
“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.
abstract of title written representation chain of title
Section § 12340.11
This law section clarifies that terms like 'preliminary report', 'commitment', or 'binder' in the context of title insurance are essentially offers to issue a title policy. These documents outline the terms under which a title policy will be provided and include specific exceptions. These reports should not be mistaken for abstracts of title and do not guarantee the condition of the property’s title.
Instead, they detail the conditions needed for the title insurer to issue a policy. They are not representations of the property's title status, but explain the conditions under which a policy might be granted.
“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.
preliminary report commitment binder
Section § 12340.13
This section defines a 'business location' as any place in California where a title company or escrow company handles the business of providing escrow services.
“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.
business location facility escrow services
Section § 12342
This section clarifies that when talking about 'holders of liens or encumbrances' in this legal chapter, it includes certain institutional third parties. These are specifically the types described in specific sections of the United States Code, Title 12, such as lenders or financial institutions.
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.
holders of liens encumbrances institutional third parties
