(a)
If an underwritten title company is placed into bankruptcy, receivership, or conservation by the commissioner, each title insurer operating under an underwriting agreement with the underwritten title company during the six months prior to the earliest of the conservation, bankruptcy, or receivership shall be liable for its proportionate share of the commissioner’s costs and any escrow and subescrow account shortages as determined by the calculations set forth in subdivisions (b) and (c).
(b)
If, during the six months prior to the earliest of the establishment of a conservation, bankruptcy, or receivership under subdivision (a), the underwritten title company was authorized by underwriting agreements to issue title policies for more than one title insurer, the liability of each title insurer is determined by multiplying the amount of the total escrow and subescrow shortages, as well as the costs, and expenses, as set forth in subdivision (c), by that title insurer’s percentage of the underwritten title company’s net premiums for policies issued by each title insurer during the 12-month period preceding the earliest of the establishment of the conservation, bankruptcy, or receivership, with each title insurer’s liability pursuant to this subdivision to be referred to as its proportionate share.
(c)
When determining the total proportionate liability of each title insurer,
the commissioner shall include the following:
(1)
The commissioner’s costs and expenses of seizing and taking control of the underwritten title company’s offices, operations, and assets.
(2)
The commissioner’s costs and expenses of handling, adjusting, and closing all subescrow and escrow accounts, including the costs and expenses of determining whether shortages exist in any subescrow and escrow accounts.
(3)
Other costs and expenses incurred by the commissioner in connection with borrowing from the Insurance Fund pursuant to subdivision (g) and foregone earnings or interest of the Insurance Fund resulting from the borrowing.
As used in this subdivision, “commissioner’s costs and expenses” includes the costs and expenses of all agents and contractors retained by the
commissioner in performing functions set forth in this subdivision, and “subescrow” and “escrow” means title subescrows and escrows. These calculations shall result in 100 percent of the shortage, costs, and expenses being proportionately allocated to each title insurer authorized to issue title policies in the last six months preceding the underwritten title company being placed into bankruptcy, receivership, or conservation.
(d)
(1)
The commissioner shall make an initial estimate of the total shortage in the escrow and subescrow accounts and the commissioner’s costs and expenses as provided in subdivision (c) and shall provide this estimate in writing to each title insurer determined to have liability under this section as soon as practicable. The initial estimate shall be substantiated by a summary of the accounting information pertinent to the commissioner’s estimate of the escrow and subescrow shortfalls and the
commissioner’s costs and expenses.
(2)
The commissioner shall make further estimates, as necessary, of the total shortage in the escrow and subescrow accounts and the commissioner’s costs and expenses as provided in subdivision (c) and shall provide the estimates in writing to each title insurer determined to have liability under this section. These estimates shall be substantiated by a detailed summary of pertinent accounting information.
(3)
After receiving an estimate pursuant to paragraphs (1) and (2), each title insurer having liability under this section shall, within 30 days after written notification, deposit its proportionate share of the shortage, costs, and expenses into an escrow account established by the commissioner for the purpose of reimbursement to subescrow or escrow accountholders, reimbursement to the commissioner in the event that the commissioner advances or
has advanced payments to subescrow or escrow accountholders, or payment or reimbursement of the commissioner’s costs and expenses pursuant to subdivision (c). If a title insurer fails to make a payment required by this subdivision within the 30-day period, the title insurer shall pay a penalty calculated at the rate of 10 percent per annum on the unpaid amount until the payment is received by the commissioner.
(e)
Nothing in this section relieves a person of liability under any other provision of law that he or she may have for a shortage as set forth in subdivision (a). A title insurer, on becoming liable for a shortage as set forth in this section, is entitled to enforce every available remedy, or bring any cause of action that would have been available to a person compensated by the title insurer.
(f)
A title insurer shall be entitled to make a claim for reimbursement for
subescrow or escrow shortages paid to subescrow or escrow accountholders and for payments of its proportionate share pursuant to subdivision (c). Those claims shall be given the same preference as those claims referenced in paragraph (2) of subdivision (a) of Section 1033.
(g)
A title insurer shall be entitled to make a claim for reimbursement for payment of its proportionate share of the commissioner’s costs and expenses paid pursuant to subdivision (c). Those claims shall be given the same preference as those claims referenced in paragraph (2) of subdivision (a) of Section 1033. The commissioner shall return to each title insurer its proportional share of any funds remaining in the escrow account after all liabilities in subdivision (a) have been satisfied.
(h)
In order to minimize potential losses and negative impacts on consumers having money in escrow accounts held by an
underwritten title company taken into conservation, bankruptcy, or receivership by the commissioner, the commissioner shall hire all necessary escrow consultants or other experts necessary to achieve this goal.
(i)
The commissioner may borrow from the Insurance Fund to cover shortages in subescrow or escrow accounts and to pay costs and expenses set forth in subdivision (c).
