Unlawful Title Rebates

STATE OF CALIFORNIA

DEPARTMENT OF INSURANCE

BULLETIN NO. 80-12

December 24, 1980

TO:

ALL TITLE INSURERS, UNDERWRITTEN TITLE COMPANIES,

CONTROLLED ESCROW COMPANIES AND OTHER INTERESTED PERSONS

SUBJECT:

INSURANCE CODE SECTION L2404 -

UNLAWFUL REBATES

Since January 9, 1974, the title industry in this state

has been operating under the guidance of Department Bulletin 74-2,

as amended by Bulletins 74-2A (issued January 31, 1975) and 74-2B

(issued January 15, 1979), setting forth this Department's position

relating to the propriety of various business practices gauged

against the requirements of Section 12404 of the I nsurance Code.

Section 12404 applies to all persons or entities engaged in the

business of title insurance in this state and operates to prohibit

the payment, either directly or indirectly, to certain persons, their

agents or representatives, having specified interests in real property ,

of any commission, rebate or other consideration as an inducement

for or as compensation on any title insurance business or any escrow

or other title business in connection with which a title policy is

issued.

It is the purpose of this Bulletin to supersede the 74-2

series Bulletins by means of a consolidation, with amendments of the

enumerated prohibited business practices set forth in that series of

Bulletins.

This consolidation is made following a reappr aisal of

industry conduct during the past six years and amendments made where

deemed appropriate due to changed economic and business conditions.

It cannot be emphasized too strongly that this consolidation, in

practical effect, constitutes a restatement of the Department's

position regarding the propriety of specified business practices

and thereforeis intended as a guide to appropriate conduct by persons

or entities engaged in the business of title insurance

e where

deemed appropriate due to changed economic and business conditions.

It cannot be emphasized too strongly that this consolidation, in

practical effect, constitutes a restatement of the Department's

position regarding the propriety of specified business practices

and thereforeis intended as a guide to appropriate conduct by persons

or entities engaged in the business of title insurance.

Any violation

of the prohibitions set forth herein, brought to t he attention of

the Department , will result in immediate enforcement action against

the person or entity found to have engaged in such activity.

As a prelimina1y, it is helpful to review and understand

the rationale of the anti-rc'oo.te pi~ovisions o: the Insurance Code

as applied to the title rn,·u".",ncc imil,,,t.r·y.

Tt. i:; Wl'll (':,t.;1lili:;rwd

that this industry o:-icr:.it •.; in ..rn L'11v iro11rnt:!nL dc~:cr·l bed Liy t.'Co110mi~,t:;

as reverse competit:on.

We d~scribed this phenomenon and the role of

the anti-rebate laws i~ Bulletin 74-2 as follows:

"Purchasers or scl~ers of residential property

who must: pay for t.r..e almost universally required policy

of title insurance seldom make a conscious selection of

a title insure:c on the basis of comparisons of product

cost, qual~ty, or service.

Rather, the selection is

usuaily made by the agent or representative of the person

required to pay £or the title policy and, as a consequence,

the title induscry's competi.:ive effor'.: has been aimed

at the agent or representative.

While the representative

has a fiduciary relationship to the purchaser or seller,

cost or service features of the transaction of potential

benefit to the pu!'.'chaser o:c seller may be subo:::dinated to

other considerations found to be personally desiraole or

beneficial to the representative

sequence,

the title induscry's competi.:ive effor'.: has been aimed

at the agent or representative.

While the representative

has a fiduciary relationship to the purchaser or seller,

cost or service features of the transaction of potential

benefit to the pu!'.'chaser o:c seller may be subo:::dinated to

other considerations found to be personally desiraole or

beneficial to the representative.

As a result the oppor­

tunity for enr:.cnment of the representative may be placed

in a higher order of priority than the opportunity of

securing for the person required to pay for the policy

of title insurance the best product in cerms of cost or

service.

In a free and competitive consumer-oriented

market, prices are generally restrained by competition.

If the selection of the title service or product is

made by a person whose primary interest in the trans­

action is a collateral benefit flowing to him from the

title entity, the motivation for the selection by such

person may not be in ~he best interest of the consumer.

However, if consideration of any kind to the party making

the selection of the title service or product is eliminated,

it is reasonable to assume that the person making such

selection will chen be motivated by other considerations

in channelins or directing title business, where such

channeling or directing is unavoidable.

It is further

assumed that when there is no possibility of a material

personal benefit or rebate to the representative of the

seller or buyer, said representative would either make

no recommendation or would recommend a listing of title

companies known to be competitive in terms of price or

service in order to protect his own business reputation

or his own competitive position.

-2­

dable.

It is further

assumed that when there is no possibility of a material

personal benefit or rebate to the representative of the

seller or buyer, said representative would either make

no recommendation or would recommend a listing of title

companies known to be competitive in terms of price or

service in order to protect his own business reputation

or his own competitive position.

-2­

Recognition of the potential for treating

the interests of the cnnoumer ns nornndnry tn tho~n

lJf flip ~•>llUUHk•l. 1 ~

n<j(.lJlL El l'-'

f'd!-)t'6,tit,11LciLlve,

,'l.•JnLt...!ll

by the fact that the c ompec!tion that exists is not

at the level of the true consumer, goes to the hear~

of the anti-rebate provisions in tne Insurance Code .

Those provisions serve as a cornerst~ne of the effort

to maintain a fair and competitive ousiness environ­

ment that will serve t.ne needs as we.:...l as the best

interests of the ultimate purchaser of the title product

or service."

While nurnero'.1s attempts have been made by various title

entities to compete directly at the cor,s~rne~ (buyer/se.1..ler) level

over the past six years, the above observacions continue to reflect.

the marketplace realities confronting the ti~le insurance industry

and the role of the regulator within this setting.

It is the over­

riding concern of this Depart~ent that the consumer of title indus­

try products and services have access to a viable and competitive

marketplace that places his or her interests aoove tnose 0£ would- be

business influencers. ~ne history of the last six years reflects

some positive movement toward achievement of this goal; however,

much remains to be done.

In furtherance of this continuing effort,

and for the added p~rpose of facilitating industry awareness and

understanding of this Jepartment's interpretation of Section 12404

and other provisions or the Insurance Code relating to unlawful

rebates, the 74-2 series Bulletins of tne Department are hereby

repealed and superseded by this document

nt of this goal; however,

much remains to be done.

In furtherance of this continuing effort,

and for the added p~rpose of facilitating industry awareness and

understanding of this Jepartment's interpretation of Section 12404

and other provisions or the Insurance Code relating to unlawful

rebates, the 74-2 series Bulletins of tne Department are hereby

repealed and superseded by this document.

Department Bulletins

No. ~q- 11 and 70-6, percaining to the sub=ect of subescrows,

remain in Lu~~ ro~ce and effec~, to the excent they are not in

conflict with the ruling of the Attorney General as set forth in

Attorney General Opinion No. CV 74/18, May 28, 1975.

As used in che following list of prohibited activities,

and for purposes of this Bulletin senerally, the term "title entity"

refers to a title insure£, underwritten title company, or controlled

escrow company.

The word "person" and the term "such person ,"

includes any person or b~siness entity defined in subsection

(a),

(b), or (c) of Sectioa 12404.

~his term applies equally to individuals

as well as to for:mz,~ or informal groups or associations of such 12404

persons .

The word "benefit" mean1 anything of value .

The word

encompasses every kind of business or promotional activity conducted

by a title entity.

The term "special relationship" means any rela­

tionship wherein a benefit, however small, flows between a title

entity and a person, as defi:1ed above.

't·:-.e word "rebate" means any

benefit flowing between a title en~ity a~d a person, as defined above .

-3-

benefit" mean1 anything of value .

The word

encompasses every kind of business or promotional activity conducted

by a title entity.

The term "special relationship" means any rela­

tionship wherein a benefit, however small, flows between a title

entity and a person, as defi:1ed above.

't·:-.e word "rebate" means any

benefit flowing between a title en~ity a~d a person, as defined above .

-3-

The word ''affiliate" means any person or business entity

who, directly or indirectly, through one or more intermediaries,

controls, or is controlled by, or is under common control with , a

title entity.

In every instance the enumerated activity is prohibited

whether done directly or indirectly, i.e., whether done or caused

to be done by the title entity or done or caused to be done by an

affili ate of the title entity.

In this regard, any effort to conceal

forbidden rebate activity t hrough the device of a special bonus or

special personal expense account which in turn is spent in a manner

that is in violation of the provisions of this Bulletin shall be

treated as an indirect violation by the individual making any such

expenditure, as well as a direct violation by t he title entity pro­

viding the bonus, expense account or the equivalent of same.

This

would apply whether the recipient of the title entity bonus , expense

account or the equival ent is denominated an employee, agent, or

independent contractor of the title entity.

The Department finds the following alleged or questioned

practices and activities to be i n violation of the anti-rebate provi­

sions of the Insurance Code.

1)

Except as otherwise authorizeo by Section 12401.8 of

the Insurance Code, charging either more or less tnan the scheduled

rate for a specified title or escrow service or for a policy of title

insurance, or for tne corr~i~ed rate charged for one or more of the

foregoing

alleged or questioned

practices and activities to be i n violation of the anti-rebate provi­

sions of the Insurance Code.

1)

Except as otherwise authorizeo by Section 12401.8 of

the Insurance Code, charging either more or less tnan the scheduled

rate for a specified title or escrow service or for a policy of title

insurance, or for tne corr~i~ed rate charged for one or more of the

foregoing.

The above prohibition

includes, but is not limited to,

delaying the issuance of a policy in order to qualify a later trans­

action for a l ower rate , cnarging a discount rate which is not appli­

cable to a particular transaction, or c oilecting only a portion of

an applicable charge for a binder and waiving t he remaining balance

if no subsequent t r ansaction occurs.

A s pecified title service is

any service defined i n the title entity's filed schedule of rates and

charges or the schedule in use by the title entity.

2)

Waiving, or o f fering to waive, all or any part of the

title entity's established f ee or charge for services which are not

the subj e ct of r ates filed with the Department.

3)

Furnishing a title report without charge to any person .

Gnder the provisions of Section 12404.1, a title entity , in its

discretion, may furnish, either orally or in wr~t~ng , the name of

the owner of record and t he record description of any parcel o f real

property without char ge so long as the company treats e½ually all

persons requestin g such information .

A title e~~i~y may also, in

its discretion , furnish without charge photo CO?ies of the deed of

record, maps , and plats , provided and t o ~he exce~t that (a) all

persons requesting such information are treated equally ; (b) such

information is furnished oniy in single copy ;

o f real

property without char ge so long as the company treats e½ually all

persons requestin g such information .

A title e~~i~y may also, in

its discretion , furnish without charge photo CO?ies of the deed of

record, maps , and plats , provided and t o ~he exce~t that (a) all

persons requesting such information are treated equally ; (b) such

information is furnished oniy in single copy ;

(c) the information

so furnished contains no advertising or promot ional mat erial for the

- 4­

benefit or use of t he person to whom it is f urn ished , and (d) the

i nformat ion r.e quo1:1tc;d u0(,'18 not CG11~t -i tul-c,

.-:1 11 ,q-Jpr;d:::al ,

inro.rnrnt i nn

kit, wo rk- up, or " tarrn" tor which a ch1t,gl! i.s o t111.:rwise require d

(Rule 4, below).

A title entity may, in i ts d i scretion, f urnis h

without charge a property profile on a single piece of property on

a form which conforms to the format contained in exhibit A attached

to this Bulletin and made a part thereof.

Title entities may make

a reasonable charge for any and all such information furnished

provided the charge is the same to all persons.

Where a charge for

such information is made, the title entity may nevertheless make a n

exception for a non-12404 person requesting such information for

research, investigation, land survey, or similar reference, whether

f or individual or corporate use or for the use of an agency of either

the local, s tate, or federal government, p rovided the requesting party

is not acting as, or for the benefit of, a "person" as defined in

·

subsection (a), (b), or (c) of Section 12404.

4)

Furnishing reports containing publicly recorded

information, appraisals, estimates or income production potential,

information kits or similar packages containing information about

one or more parcels of real property (other than as permitted under

Section 3, above) helpful to any such person without making a charge

that is commensurate with the actual cost of the work performed and

the material furnished

orts containing publicly recorded

information, appraisals, estimates or income production potential,

information kits or similar packages containing information about

one or more parcels of real property (other than as permitted under

Section 3, above) helpful to any such person without making a charge

that is commensurate with the actual cost of the work performed and

the material furnished.

5)

With respect to any such person making or guaranteeing,

or o f fering to make or guarantee, either directly or indirectly:

(a) a loan; (b) the proper per formance of escrow services; or (c)

the performance of an undertaking (e.g., certifying that any such

person, or another on his behalf, has funds on deposit when this fact

has not been verified by the title entity).

6 )

Providing, or offering to provide, either directl y

or indirectly, a "compensating balance" or deposit in a lending

institution either for the express or implied purpose of influencing

the extension of credit by such lending institution to any such person,

or for the express or implied pur pose of influencing the placement

or channeling of title insurance business by such lending institution.

7)

With respect to any such person, paying, or offering to

pay, either directly or indirectly, for:

(a) the services of an

outside professional whose services are required by any such person

to complete or structure a particular transaction; (b) the salary

of an employee of such person; (c) the salary or any part of

the salary of a relative of any such person employed by a

title entity where the payment is in excess of the reasonable value

of the work actually performed; (d) a fee for making an inspection

or app raisal of property whether or not the fee bears a reasonable

relationship to the services performed; (e) for services required

to be performed by any such person in his or her professional capacity;

salary of a relative of any such person employed by a

title entity where the payment is in excess of the reasonable value

of the work actually performed; (d) a fee for making an inspection

or app raisal of property whether or not the fee bears a reasonable

relationship to the services performed; (e) for services required

to be performed by any such person in his or her professional capacity;

(f) except as otherwise provided in Section 12412, any evidence of

title or a copy of the conte nts thereof, which is not produced or

issued by the title entity if the evidence of title relates to a

current transaction; (g) the rent for all or any part of the space

-5­

ot:<.:upiod Ly t1 11y

11ut.:: h

P""t: u u11 1

( Ii )

1111111cy,

pJ..L.Gt,!:~ ui

oL11eJ. Lil Luy:; ut

value i n any kin d o f a conte :j t or p romot. Lo n.-11 e n <1er1vor; (L) any

ddvertising effort made in the n ame of, for, or on behalf of any

such person; (j) any business form, for any suc h person, other

than a form regularly used in the conduct of the title entity's

business which form is furnished solely for the convenience of the

title entity and does not constitute a benefit, as defined herein,

to any such person; (k) or any salary, commission or any other

consideration to any emp loyee who is at the same time actively

engaged as a real estate licensee in the real property or mortgage

brokerage business.

8)

Pay ing for, or offering to pay for, the cancellation

fee, the f ee fo~ the preliminary title report or other fee on behalf

of any such person after inducing such person to cancel an order

with another title entity

commission or any other

consideration to any emp loyee who is at the same time actively

engaged as a real estate licensee in the real property or mortgage

brokerage business.

8)

Pay ing for, or offering to pay for, the cancellation

fee, the f ee fo~ the preliminary title report or other fee on behalf

of any such person after inducing such person to cancel an order

with another title entity.

9)

Paying for, or offering to pay fo4 entertainment,

vacations, gifts, business trips, convention expenses, travel

expenses, membership fees, registration fees, lodging, 04 except

as provided below, food, meals, or beverages on behalf of any such

person, directly or indirectly, or providing letters of credit,

c redit cards, or charge a c count privileges of any kind or any similar

benefit to any such person for any purpose whatsoever.

Moderate expenditures for food, meals, and beverages made

for or on behalf of any such person, if correctly claimed and

properly substantiated as a legitimate business expense under the

provisions of the statutes and regulations of the I nternal Revenue

Service.

This exception a l so applies to title entity plant tours

and title insurance seminars where the products or services offered

by the title entity are discussed or defined.

Such tours or seminars

may serve as the situs for moderate food, meal, and/or beverage

expenditures for o r on behalf of such persons provided that the

tour, seminar, or gathering is dedicated exclusively to the presenta­

tion or discussion of title insurance and escrow products o r services.

Educational seminars, movies, closed circuit television presentations,

and similar programs, dedicated in whole or in part to subjects other

than title insurance and escrow products or services, are not a

proper subject for expenditures under this exception.

To the con­

trary, such gatherings are an indicia of unlawful inducement, under

Insurance Code Section 12404, even without any expenditure for food,

meals, or beverages.

-6­

rcuit television presentations,

and similar programs, dedicated in whole or in part to subjects other

than title insurance and escrow products or services, are not a

proper subject for expenditures under this exception.

To the con­

trary, such gatherings are an indicia of unlawful inducement, under

Insurance Code Section 12404, even without any expenditure for food,

meals, or beverages.

-6­

With the foregoing exceptionf,, food, meal, and beverage

exp,~n<liturcR for or on )>.-,lJ,,lf nf Hth:h 111•r:.,i1 1:: ,11·,, rnund t·c1 J>,, in

violation of tho anti-rebate proviH~ons of the Insurance Code

whether the title entity, either directly or indirectly, pays for

or furnishes the food, rr.eal, or beverage or contributes money for

the purchase of same.

SiDilarly, the prohibition applies whether

the .:;xpenditure is made by a title entity acting along or by one

or more title entities acting through either formal or informal

association.

This rule also applies to group activities where such

persons comprise 50% or more of tiose in a~tendance o r those for

whom the oenefi~ is intended.

Activit~es such as (but not limited

to) meetincs, luncheons, dinners, conventions, installation

ceremonies, celebrations, outings, or related activities of local,

regional, or state ooards of real~y, cocktail parties, hospitality

room functions, open house celebrations, d&nces, fishing trips,

motor vehicle rallies, sporting events of all kinds, gambling

trips , hunting trips or outings, golf tournaments , artistic

performances, outings in recreation areas or entertainment areas,

and related activities are not the proper situs for fooc , meal , or

beverage expenditures made for or on heha:f of such persons

ospitality

room functions, open house celebrations, d&nces, fishing trips,

motor vehicle rallies, sporting events of all kinds, gambling

trips , hunting trips or outings, golf tournaments , artistic

performances, outings in recreation areas or entertainment areas,

and related activities are not the proper situs for fooc , meal , or

beverage expenditures made for or on heha:f of such persons .

Further, the furnishing of transportation to or from

such activities or areas or payment of the fee, charge, or admission

to such activities or areas, or the subsid~zation or reimbursement

of the cost to such persons of attendir.g or participating in such

activities or visiting such areas, constitutes a violation of the

anti-rebate provisions of the Insurance Code.

This prohibition

applies under every foreseeable circumstance, whether the benefit

is offered, paid, or furnished in whole or in part, directly or

indirectly, by a r.itle entity acting alone or by one or more title

entities acting th~ough either formal or informal association.

10)

Paying for, or offeri~g to pay for, any advertising

ostensibly for the benefit of the title entity t hrough any adver­

tising medium, the end result of which is the substantial subsidi­

zation of a product, service, or publication used by, or published

or printed by or £or the benefit of, any such person or any associa­

tion or group of •. uch persons.

Examples of such advertising are

ads placed in subdivision or tract brochures, multiple listing

services or books, exchange bulletins, newsletters, information

sheets, and progr ams, announcements, periodicals, or any printed

matter associated with meetings, seminars, or conventions of such

persons as well as registers, directories, or indices of such

persons

ion or group of •. uch persons.

Examples of such advertising are

ads placed in subdivision or tract brochures, multiple listing

services or books, exchange bulletins, newsletters, information

sheets, and progr ams, announcements, periodicals, or any printed

matter associated with meetings, seminars, or conventions of such

persons as well as registers, directories, or indices of such

persons.

A presumption of "substantial subsidization" will be

made whenever (1) 10% or more of the adver~ising revenue or

printing costs, whichever is less, of any pamphlet, program,

announcement, register, directory, index, book, brochure, periodical,

newsletter, bulletin, information sheet, or printed matter of any

kind intended for local (as opposed to statewide) distribution or

-7-

circulation is paid for by one LiLl0 enlity; or (2) 50% or more of the

advertising rcvcnur.: or print ill<J l!oi1L!:l 1 wl11d1l•vv1·

1~1 lt•KH, ol nny

pamphlet, program, announcement, register, directory, index, book,

brochure, periodical, newsletter, bulletin, information sheer, or

printed matter of any kind intended for local (as opposed to

statewide) distribution or circulation is paid, in the aggregate,

by one or more title entities.

Business info.:_~r,iation, whether printed or oral, advertising

novelties, and gift itews that bear the name of the title entity (biit

not the name of the recipient) may be given to such persons, provided

and to the extent that, (1) the information, gift or novelty item con­

stitutes advertising directed impersonally at the general con~umer

public, meaning that the info~mation, gift, or novelty item must be

given or made available "over the cou~1ter", by phone through a gen­

erally publicized number, or on some comparable basis to all such

persons indiscriminately; (2) the information, gift, or novelty item

costs no more than $3.50 or, if it is a repea~ item given or made

available on a continuing basis (such as a periodic business forecast,

a timely recorded message, or a business newsle

ust be

given or made available "over the cou~1ter", by phone through a gen­

erally publicized number, or on some comparable basis to all such

persons indiscriminately; (2) the information, gift, or novelty item

costs no more than $3.50 or, if it is a repea~ item given or made

available on a continuing basis (such as a periodic business forecast,

a timely recorded message, or a business newsletter), that it cost no

more than $3.50 per recipient or user per year; and (3) distribution

of the information, gift, or novelty item, if by mail, is made on a

non-selective basis to al: ?ersons known or reasonably believed to be

members of the business or professional group in the natural geographic

area or political subdivision toward which the advertising effort is

directed.

11)

Furnishing, or offering to furnish, all or any

part of the time or productive effort of any employee of the

title entity (e.g., office manager, escrow officer, secretary,

clerk, messenger, etc.) to any such person.

12)

Furnishing or offering to furnish, paying for or

offering to pay for, furnitLre, office supplies, telephones,

equipment or automobile to any such person, or paying for, or

offering to pay for, any portion of the cost of renting, leasing,

operating or maintaining any of the aforementioned items.

13)

Providing, or offering to provide, nontitle services

(e.g., computerized bookkeeping, forms management, computer pro­

gramming, or any similar benefit) to any such person.

14)

Renting, or offering to rent, space from any such

person, regardless of the purpose, at a rent which is excessive

when compared with rents for comparable space in the geographic

area, or paying, or offering to pay, rent based in whole or in

part on the volume of business generated by any such person .

15)

Advancing er paying into escrow, or offering to

advance or pay into escrow, a~y of the tit~e entity funds or

"closing short,'' except as specifically permitted by Section

12404.

-$-

ich is excessive

when compared with rents for comparable space in the geographic

area, or paying, or offering to pay, rent based in whole or in

part on the volume of business generated by any such person .

15)

Advancing er paying into escrow, or offering to

advance or pay into escrow, a~y of the tit~e entity funds or

"closing short,'' except as specifically permitted by Section

12404.

-$-

16)

Buying from or selling to, or exchanging wi ch, or

offering to buy from or sell to, or exchange with, any such

person, shares of stock in any title entity or any other business

concern owned by, or affiliated with, a title entity, regardless

of the price or relative value except for purchases or exchanges

made through a general public offering.

This prohibition also

applies to the furnishing, or offer to furnish, legal or other

professional services bf any title entity ~o any such p~rson or

group of persons to assist such person(s) in the formation of a

title entity.

The burden will be placed on any existing title

entity that invests in a new title entity formed by one or more

of such persons to show that such investment does not represent

a benefit coming within the prohibition of this Bulletin.

17)

Contracting, or offering to contract, with any

escrow holder or lending institution to receive, hold, draft,

execute, deliver or otherwise handle any documents or funds for,

or on behalf of, the escrow holder, with or without charge, where

the duty, obligation, or responsibility- for receiving, holding,

drafting, executing, delivering or otherwise handling the documents

or funds ~s ostensibly that of the escrow holder and where the fee

for all, or any part, of such escrow service is billed or collected,

in whole or in part, either directly or indirectly, by the escrow

holder

of, the escrow holder, with or without charge, where

the duty, obligation, or responsibility- for receiving, holding,

drafting, executing, delivering or otherwise handling the documents

or funds ~s ostensibly that of the escrow holder and where the fee

for all, or any part, of such escrow service is billed or collected,

in whole or in part, either directly or indirectly, by the escrow

holder.

The listing of the foregoing items is not be be construed

as definitive and, therefore, it should not be inferred that an

omission from the listing constitutes a justification for engaging

in a particular rebate practice which has not been specifically

proscribed by statute or bulletin.

To the contrary, any "special"

relationship between a title entity, as defined in Section 12404,

coming to the att ention of the Commissioner may be investigated

with the burden placed on the title entity to show that such "special"

relationship is not in violation of Section 12404 as interpreted by

this Bulletin.

The presence of a benefit flowing to or from the title

entity that would create the presumption of an unlawful rebate

includes, but is not limited to, all of the aforementioned business

practices as well as the practice of channeling or directing tit+e

business by a person to a title entity.

A special relationship might

be presumed to exist based on the flow of benefit to the title entity

from such person, depending on the facts of each situation.

This

presumption, if found to exist, will not be rebutted by evidence that

a benefit moving to such person is balanced by an equivalent considera­

tion or value of performance moving from such person to the title

entity.

For example, the p~esumption would ~ot be overcome by

evidence that a title entit~,• s payment of ::.o:-.2y or other consideration

for any services actually r<.::::-.dered by any ,;;..:c:1 pE::::cso.,. was merely

payment of the fair value c:.: those servi.::-cs , a::..:. ::-.ot an overpayment.

-9-

equivalent considera­

tion or value of performance moving from such person to the title

entity.

For example, the p~esumption would ~ot be overcome by

evidence that a title entit~,• s payment of ::.o:-.2y or other consideration

for any services actually r<.::::-.dered by any ,;;..:c:1 pE::::cso.,. was merely

payment of the fair value c:.: those servi.::-cs , a::..:. ::-.ot an overpayment.

-9-

Correspondingly, a special relationship may exist undei·

item (15) where a title entity accepts in escrow an instrument from

such person which is not readily negotiable in normal commerce and,

notwithstanding such fact, the title entity closes the transaction

by advancing its own funds pending collection on the tendered in­

strument.

In such a case, such person may be benefiting by the

amount of interest earned on the committed but uncollected funds

from the date of issuance of the instrument until payment is actu­

ally made following tender of the instrument.

This presumption may

be viewed as a direct violation if there is evidence tending to show

an intentional delay in tendering the instrument for payment by the

title entity, or that the title entity failed to gain assurances that

the instrument would be paid in the normal course of commercially

acceptable business practices.

All persons subject to Insurance Code Section 12404 are

admonished to read this Bulletin, including the listing of prohibited

activities, as frequently as necessary to remain fully apprised of

its contents.

All title entities are instructed to distribute a copy

of this Bulletin to every office or branch manager and escrow officer

in their employ.

Further, all title entities are urged to carefully

instruct their employees in the character and scope of prohibited

activities defined in this Bulletin.

In reviewing questionable

activity the Commissioner will look to the spirit as well as the

letter of the law.

All persons subject to Insurance Code Section

12404 and this Bulletin should be guided accordingly

row officer

in their employ.

Further, all title entities are urged to carefully

instruct their employees in the character and scope of prohibited

activities defined in this Bulletin.

In reviewing questionable

activity the Commissioner will look to the spirit as well as the

letter of the law.

All persons subject to Insurance Code Section

12404 and this Bulletin should be guided accordingly.

In summary, the purpose of this Dulletin is to bring clarity

and understanding to issues arising from the anti-rebate provisions

of the Insurance Code and to assist all title entities and the persons

with whom they regularly conduct business, in determining how they may

meet their respective fiduciary relationships within the limitations

prescribed by law, as set forth in the California Insurance Code.

Wesley J. Kinder

Insurance Commissioner

-10­

---------------------------------------------------------------

----

--------

--------

---------

--- -----

------

COM.

'fHIS ~ITLE I NFOPu¾P..7:c,); :-:;.s 322..,: ~~ -~ ~~.>:~3~~ ~ ¾·:'::..10t?i1 .:r:...:.u~~E 3Y

TITLE cc~:p A~-~ :;:~ CC :-J?O:...V__'.\.~:c :: WI'::':. Tr:'2 :,.U:.;ss ESTA3::..,:s:~,:,D

BY ~HE CALIFORNI A I NSUR~jCE CO~XISS~C~~R , w~c U~GES YOU TO SHOP

FOR THE BEST SERVICE AVAILABLE A~~ CC~?ARE CHARGES AKD FEES

POR TITLE I NSURANCE, ESCROW, AND C'I'HER SERVICES ASSOCI ATED WI':'::

'PHE PURCHASE OR SALF. OF A HOME.

?RO?ERTY ?ROF:: ::..,E:

ADDRES S:

RECORD OWNER:

DEED RECORDING DA~E:

DCCCM~NTA~Y TRANS?ER TAX : $

CONCURRENT TRUST DEED, I? ANY :

( See At t ac he d)

LEGAL DESCRIPTION :

( Se e Atta ched Deed Copy and Plat)

TAX INFORMATION:

As sess ors Parce l No .

As s ess ed Value Land

$

As s es s ed Va lue Improveme nts

$

Exemption

$

Ne t Assessed Value

$

$______

Install ment s

$

/ 7

In lieu o f the above, s e e a t tache d copy o f Asse ssment Roll .

COMPARABLE SALES

DATE SOLD

ADDRESS

TR ANSFER TAX

1

2

'

? ANY :

( See At t ac he d)

LEGAL DESCRIPTION :

( Se e Atta ched Deed Copy and Plat)

TAX INFORMATION:

As sess ors Parce l No .

As s ess ed Value Land

$

As s es s ed Va lue Improveme nts

$

Exemption

$

Ne t Assessed Value

$

$______

Install ment s

$

/ 7

In lieu o f the above, s e e a t tache d copy o f Asse ssment Roll .

COMPARABLE SALES

DATE SOLD

ADDRESS

TR ANSFER TAX

1

2

'

. ;

3

Inst r uctions:

The statement a t the t op of t his f or m must be

in capital letters, not l es s tha n 11-point type , and of a

contr a s ting color f r om the rest of the form.

Exhi bit A

Errata

A phrase is missing from the second paragr a ph of item 9 on

page 6.

That para graph, which begins with the wo rds "Moderate

expenditures fol' food ... " should end with a comma nnd the

phrase "may be mad~ .

11 s hould be added .

The second sentence of the second paragraph of i tem 17 on page 9

{line 6 of tha t pal'agraph) contains the phrase "between a title

entlty 11 , which is a surplusage .

It s hould be deleted so

tha t the sentence reads as follows :

To the contrary _, any "special" relationship, as cefined

in Section 12404 , coming to the attention of the

Comrnl.s s loner •••