To:             Title Insurers and Title Agencies

From:        Mary Kempker, Director of the Consumer Affairs Division, Missouri Department of Insurance, Financial Institutions and Registration

Date:         October 13, 2006

The Consumer Affairs Division of the Missouri Department of Commerce & Insurance (DIFP) encourages title insurance companies to review the activities of all employees within their business to ensure that they are properly licensed for the tasks they are performing. Recently, the Director issued consent orders against two title agencies requiring compliance with the Department's licensing provisions. This bulletin is intended to provide public notice to all title insurers and title agencies in an effort to increase compliance without immediate legal action.

Missouri law prohibits any person from selling, soliciting or negotiating insurance unless he/she is properly licensed with DIFP. §375.014.1 RSMo Cum. Supp. 2005. "Negotiate" is defined in §375.012.1(12) RSMo Cum. Supp. 2005, as the "act of conferring directly with or offering advice directly to a purchaser or prospective purchaser of a particular contract of insurance concerning any of the substantive benefits, terms or conditions of the contract, provided that the person engaged in that act either sells insurance or obtains insurance from insurers for purchasers." This means title agency employees, who are involved in real estate closings, may be involved in "negotiating" insurance. However, salaried officers or employees of title insurers, title agents or title insurance agencies are exempt from §375.014.1 RSMo Cum. Supp. 2005 if they do not: 1) establish premiums for policies of title insurance; 2) determine insurability; or 3) issue commitments, policies or other contracts of title insurance. § 381.031(17) RSMo Cum. Supp. 1999.

The division seeks to provide guidance in the interpretation of this section and give meaning to the phrase "determining insurability." Determining insurability may be better described as a process rather than a single act and may involve a number of different employees. It occurs whenever a person drafts or reviews for legal accuracy and sufficiency or causes others to draft, prepare or review any document necessary to insure valid title to the subject real property, including:

  • drafting title insurance commitments, including preliminary requirements necessary for coverage to be provided in the subsequent title insurance policy;
  • preparing deeds, sellers' affidavits and lien releases based on the closer's review of the documents yielded by the preliminary title search;
  • performing, or instructing others to perform, a final title search to determine whether any public evidence of defect in title have arisen between the date a commitment was issued and the date of closing;
  • reviewing sellers' affidavits to ensure there are no amounts due and owing for services, labor or material used in the construction or repair of buildings or improvements to real property subject to the closing transaction;
  • collecting and scrutinizing deeds, liens, deeds of trust, promissory notes, trust agreements, marital waivers and powers of attorney to determine the legal accuracy, sufficiency and effect of each document in an effort to satisfy all requirements set forth in a title insurance commitment;
  • instructing the title insurance company to modify the exceptions in the title insurance policy, based on the closer's determination of which commitment requirements have been met and which have not;
  • drafting and/or executing HUD-1 forms, tax agreements and certain loan documents required by the lender;
  • explaining the legal effect of each of the foregoing forms and documents to the parties to the transaction, including the coverage and exceptions to coverage to be provided by the title insurance policy, as well as explaining the premiums and fees charged for performing title searches and issuing the title insurance policy;
  • authority to modify the gross amount of premium and fees assessed for performing title insurance searches and issuing the title insurance policy;
  • receiving, depositing, balancing and issuing funds in accord with escrow closing instructions and HUD-1 form, including premium; and
  • ensuring all of the seller's and existing lienholder's interests (to the extent intended by the parties) in the subject real property are extinguished before the title insurance policy is issued.

It is the view of the Consumer Affairs Division that if a salaried employee who negotiates insurance also participates in determining insurability as defined by the above processes, then continued participation without licensure as a title agent would violate § 375.014.1, RSMo Cum. Supp. 2005, subjecting the individual to enforcement actions for unlicensed activity. The employer of the employee also may be subject to enforcement actions under §375.141.3 RSMo Cum. Supp. 2005 for knowingly allowing the unlicensed activity.

Salaried individuals who negotiate insurance and determine insurability are required to be licensed with the Department as a title insurance agent. This guidance should be applied to all salaried employees whether the employee is a closer, searcher, processor or receptionist. It is the actual job duties, not the job title, which governs whether an employee must be licensed.