3 Colo. Code Regs. § 702-8-1-2-5

Current through Register Vol. 47, No. 24, December 25, 2024

Section 3 CCR 702-8-1-2-5 - Rules Regarding Consumer Protections

A. In order to comply with the requirements of § 10-11-106, C.R.S., no title entity shall issue a commitment for title insurance without first performing, or causing to be performed, a reasonable examination of the property records for the property to be insured. An examination shall be considered reasonable if it conforms to written standards and practices as determined by the title insurance company that is insuring the transaction. Nothing contained herein shall permit a title insurance company to create written standards and practices that do not comply with sound underwriting principles. Nothing contained herein shall prohibit title insurance companies from developing separate examination standards for different types of transactions or geographical areas.

B. Every title entity shall ensure that the title commitment, as may be amended or modified, fully discloses to all recipients the terms upon which title to the property will be insured, the extent of coverage proposed, all proposed title exceptions, and, in a clear and conspicuous manner, shall show whether the title commitment does or does not commit to insure over or delete those exceptions to the title specified therein, consistent with § 10-11-106, C.R.S.

C. Every title entity shall ensure that the title commitment, as may be amended or modified, fully discloses the record vested owner as shown by the applicable county real estate records as of the effective date shown on the commitment. If a circumstance exists which requires a person other than the vested owner to be shown, the title entity shall disclose, in a clear and conspicuous manner, the reason(s) for the deviation from the available county real estate records.

D. Every title entity shall ensure that, except for standard, or preprinted exceptions, or as set forth in Subsection E below, all proposed title exceptions on a title commitment for the issuance of an owner's policy of title insurance make reference to the recording information of the document to be excepted from coverage.

E. For owner's policies of title insurance, if a title entity has conducted a reasonable examination of title and was unable to find recorded information for a known impairment, the title entity may make use of a specific exception if the title entity uses other identifiable information, including, but not limited to marks on a document, names of parties, and case numbers, that clearly identify and makes readily available to the consumer the instrument or information referenced in the specific exception. Nothing in this subsection may be construed to allow a title entity to avoid the requirement of conducting a reasonable examination of title.

F. Whenever a title entity provides the closing and settlement service that is in conjunction with the issuance of an owner's policy of title insurance, it shall update the title commitment from the date of issuance to be as reasonably close to the time of closing as permitted by the real estate records. Such update shall include all impairments of record at the time of closing or as close thereto as permitted by the real estate records. The title insurance company shall be responsible to the proposed insured(s) subject to the terms and conditions of the title commitment, other than the effective date of the title commitment, for all undisclosed matters that appear of record prior to the time of closing.

G. As soon as reasonably practical prior to closing, every title entity shall notify in writing every prospective insured under an owner's title commitment the circumstances under which the title insurance company is responsible for all matters which appear of record prior to the time of recording (commonly referred to as "Gap Coverage"). This notice shall be clear and conspicuous, reasonably understandable, and designed to call attention to its nature and significance.

H. Every title insurance company shall be responsible to the proposed insured(s) subject to the terms and conditions of the title commitment, other than the effective date of the title commitment, for all matters which appear of record prior to the time of recording whenever the title insurance company, or its agent, conducts the closing and settlement service that is in conjunction with its issuance of an owner's policy of title insurance and is responsible for the recording and filing of legal documents resulting from the transaction which was closed.

I. If a title entity undertakes to insure any person or entity against the possible adverse effect of any recorded lien, recorded encumbrance or other recorded interest, in accordance with § 10-11-106, C.R.S., and any other applicable law, it shall:

1. Delete such recorded lien, recorded encumbrance or other recorded interest from the schedule of exceptions in its title commitment and have on hand funds, securities, a bonded obligation, or letter of credit payable to the order of said title entity, adequate to discharge such lien, encumbrance or other interest in the event said lien, encumbrance or other interest is perfected to the detriment or possible detriment of the person or entity insured, or any successor in interest to such person or entity;

2. Insure over and reflect such recorded lien, recorded encumbrance or other recorded interest in the schedule of exceptions in its title commitment, and receive an appropriate indemnity from the responsible party; or

3. Insure over the defect in accordance with the title entity's sound underwriting practices and guidelines; and

4. Not raise as a defense to any claim based on, or arising out of, the deletion or insurance over such defect or exception that the insured assumed, agreed to, or had knowledge of the said defect or exception.

J. All title entities shall comply with the "good funds law" contained in § 38-35-125, C.R.S. In particular, no title entity that provides closing and settlement services for any real estate transaction shall disburse funds as a part of such services until the funds to be disbursed have been received and are either: available for immediate withdrawal as a matter of right from the financial institution in which the funds have been deposited; or available for immediate withdrawal as a consequence of the agreement of the financial institution in which the funds are to be deposited or the financial institution upon which the funds are drawn. Any such agreement shall be made with or for the benefit of the person or entity providing closing and settlement services for a real estate transaction.

1. Notwithstanding the provisions of this Section 5.J., the entity providing closing and settlement services may advance funds, not to exceed five hundred dollars, on behalf of interested parties for the transaction to pay incidental fees for such items as tax certificates and recording costs or to cover minor changes in the closing adjustments.

2. A title entity may satisfy the requirements of this Section 5.J. by use of the Good Funds Agreement appended as Appendix A, without substantial amendment or modification. This is the only agreement approved by the Division for such purpose.

3. Nothing in this Section 5.J. shall be deemed to prohibit the recording of documents before such funds are available provided all necessary parties to the transaction consent in writing thereto.

4. The requirements of Section 5.J. above may be waived by the seller in the real estate transaction if:

a. It is specified as part of written closing instructions in advance of closing that the seller waives the requirements set forth in Section 5.J. above and that the person or entity conducting the closing, unless such person or entity is the seller, is not to handle the receipt and disbursement of funds as part of the closing; and

b. Any holder of a lien encumbering the property up to the time of closing agrees, in writing, to such waiver and further agrees, in writing, to release such lien immediately upon receipt of a check from the closing drawn in the amount of the outstanding indebtedness secured by such lien. Such an agreement shall obligate the lien holder to release such lien regardless of whether the payoff check received has been or will be honored.

5. Any seller who so requests as part of written closing instructions in advance of closing, shall be entitled to receive the proceeds of closing in a cashier's check or in funds electronically transferred to an account specified by the seller.

K. No title entity shall provide closing and settlement services without receiving written instructions from all necessary parties. All amendments to existing written instructions must be in writing.

L. Every title entity shall be responsible for properly conducting each closing or settlement service and recording such documents as it is directed in writing to record in conjunction therewith, for each transaction for which such title entity charges and collects a fee.

1. All documents must be submitted for recording within seven (7) calendar days of:

a. Receipt of the document to be recorded; or

b. The disbursement date of the transaction.

2. In the event incorrect or incomplete documents are received, the title entity shall have seven (7) calendar days, from receipt of the corrected or complete documents, to submit the documents for recording.

3. A title entity shall be deemed in compliance if they submit the recording to a third party electronic recording vendor or the county recorder's office.

M. Every title entity shall notify in writing, at the time of delivery of the title commitment, every prospective insured in an owner's title commitment for a single family residence (including a condominium or townhouse unit) of that title entity's general requirements for the deletion of an exception or exclusion to coverage relating to unfiled mechanic's or materialman's liens, except when said coverage or insurance is extended to the insured under the terms of the policy. This notice shall be clear and conspicuous, reasonably understandable, and designed to call attention to its nature and significance. Notwithstanding the foregoing, nothing contained in this Section 5.M. shall be deemed to impose any requirement upon any title insurance company to provide mechanic's or materialman's lien coverage.

N. Every title entity shall issue and deliver to the insured, the title insurance policy within ninety (90) calendar days of:

1. The effective date of the owner's title insurance policy if the title entity is providing closing and settlement services for the transaction; or

2. The satisfaction of the terms, conditions and requirements of the title commitment if the title entity is not providing closing and settlement services for the transaction.

3. The title entity is not responsible for compliance with this subsection if the title entity has not received payment for the title insurance premium.

O. A title insurance company shall notify the Division in writing within thirty (30) calendar days, if at any point a title insurance company becomes aware that a title insurance agent or title insurance agency fails to issue and deliver to the insured the title policy, in compliance with Section 5.N. above.

P. Every title entity is responsible for:

1. Ensuring that rates charged to insureds for the title entity's products by the following persons are the same as the rates that the title entity has filed with the Division:

a. The title entity's employees; and

b. Title insurance agents with whom the title entity has an employment relationship, a contract, or an agency agreement.

2. Pursuant to § 10-3-131, C.R.S., when the following persons are acting on the title entity's behalf, any unfair business practice, when the title entity knew or should have known about the unfair business practice:

a. The title entity's employees; and

b. Title insurance agents with whom the title entity has an employment relationship, a contract, or an agency agreement.

3. In all other areas, exercising reasonable efforts to ensure that the acts of its employees and other authorized agents, including closing agents and title insurance agencies, which are performed within the scope of the person's employment, contract, agency agreement, or closing protection letter, comply with all laws and regulations concerning the business of title insurance.

a. For the purposes of market conduct actions involving a title insurance company conducted pursuant to Part 3 of Article 1 of Title 10 C.R.S., with the exception of systemic errors, the Division will consider an error rate that exceeds 7% for claims and an error rate that exceeds 10% for other issues, by employees and agents of the title insurance company performed within the scope of the person's employment, contract, agency agreement, or closing protection letter, to be a reportable exception that the title insurance company failed to conduct reasonable efforts to ensure its employees and agents complied with the laws and/or regulations at issue in the market conduct action.

b. For the purposes of market conduct actions involving a title insurance agent or agencies conducted pursuant to Part 3 of Article 1 of Title 10, C.R.S., with the exception of systemic errors, the Division will consider an error rate that exceeds 7% for claims and an error rate that exceeds 10% for other issues to be a reportable exception.

Q. Every title entity shall maintain adequate documentation and records sufficient to show its compliance with this regulation and Title 10 of the Colorado Revised Statutes for a period of not less than seven (7) years, except as otherwise permitted by law.

3 CCR 702-8-1-2-5

38 CR 17, September 10, 2015, effective 10/1/2015

39 CR 14, July 25, 2016, effective 8/15/2016

40 CR 03, February 10, 2017, effective 3/15/2017

41 CR 12, June 25, 2018, effective 7/15/2018

42 CR 14, July 25, 2019, effective 8/15/2019

43 CR 14, July 25, 2020, effective 8/15/2020

45 CR 16, August 25, 2022, effective 9/14/2022