ARTICLE 6. Rebates and Commissions [12404. - 12413.5.]

Cal. Insurance Code - INS 6.

in effect

Cal. Insurance Code - INS § 12404. Section 12404.

(a) It is unlawful for any title insurer, underwritten title company or controlled escrow company to pay, directly or indirectly, any commission, compensation, or other consideration to any person as an inducement for the placement or referral of title business. Actual placement or referral of title business is not a precondition to a violation of this section, whether the violation is or is not a per se violation pursuant to subdivision (c). (b) For purposes of this section, the following definitions are applicable: (1) “Compensating balance” is a balance maintained in a lending institution by any title insurer, underwritten title company, or controlled escrow company for the express or implied purpose of influencing the extension of credit to a third party or the provision of goods, services, or benefits to a third party as an inducement for the placement or referral of title business by a third party. (2) “Person” means any individual or entity who is any owner or prospective owner, lessee or prospective lessee of real property or any interest therein, any obligee or prospective obligee of an obligation secured or to be secured either in whole or in part by real property or any interest therein, or any person who is acting or who is in the business of acting as agent, representative, attorney, or employee of those persons. (3) “Title business” means the “business of title insurance” as defined in Section 12340.3, and includes, but is not limited to, the offering of title insurance, escrow, or other services by a title insurer, underwritten title company, or controlled escrow company. (c) The following activities, whether performed directly or indirectly, are deemed per se inducements for the placement or referral of title insurance business by any person and are unlawful: (1) Paying or offering to pay, furnishing or offering to furnish, or providing or offering to provide assistance with the business expenses of any person, including, but not limited to, rent, employee salaries, furniture, copiers, facsimile machines, automobiles, telephone services or equipment, or computers. (2) Providing or offering to provide any form of consideration intended for the benefit of any person, including cash, below market rate loans, automobile charges, or merchandise or merchandise credits. (3) Placing or offering to place on behalf of any person, compensating balances. (4) Advancing or paying or offering to advance or pay money on behalf of any person into an escrow to facilitate the closing thereof, other than any sum which represents the proceeds of a loan made in the ordinary course of business; or an advance not to exceed 2 percent of the sales price of the real property being sold or exchanged through the escrow or the amount of any loan secured by real property involved in the escrow, whichever is greater; or the extension of credit or an advance for the costs, fees and expenses of the escrow or of the title insurance issued or to be issued in connection therewith. (5) Disbursing or offering to disburse on behalf of any person escrow funds held by a title insurer, underwritten title company or controlled escrow company before the conditions of the escrow applicable to that disbursement have been met, or in a manner which does not conform to Section 12413.1, including disbursing or offering to disburse before the expiration of the appropriate period established in Section 12413.1. (6) Furnishing or offering to furnish all or any part of the time or productive effort of any employee of the title insurer, underwritten title company, or controlled escrow company to any person for any service unrelated to the title business. (7) Advertising or paying for the advertising in any newspaper, newsletter, magazine, or publication that is produced by, or on behalf of, a person, or that results in a direct, or indirect, subsidy to a person. (8) Expenditures for food, beverages, and entertainment for a person. (d) Expenditures for the following are not deemed to be unlawful or in violation of this section: (1) Promotional items with a permanently affixed company logo of the underwritten title company, title insurer, or controlled escrow company, with a value of not more than ten dollars ($10) each. “Promotional item” does not include a gift certificate, gift card, or other item that has a specific monetary value on its face, or that may be exchanged for any other item having a specific monetary value. (2) Furnishing education or educational materials exclusively related to the business of title insurance for a person if continuing education credits are not provided. (3) Other expenditures for a person, as permitted by the Department of Insurance by regulation. (e) The provision or payment of any form of consideration as an inducement for the placement or referral of title business not specifically set forth in this section shall not be presumed lawful merely because they are not specifically prohibited. (f) The Insurance Commissioner may determine compliance and enforce the provisions of this section by written order, regulation or written consent which may take into consideration standards, conditions, guidelines, principles, or definitions utilized by other states or federal agencies but those standards, conditions, guidelines, principles, or definitions shall not be determinative. (g) It is the intent of the Legislature that the enactment of this section shall have no effect on the applicability of other sections of the Insurance Code that are in existence prior to the enactment of this section and which specifically, or by implication, refer to this section. The Legislature hereby intends that this section, including the specific terms employed within it, shall be liberally construed for the purpose of protecting consumers of title business.

Cal. Insurance Code - INS § 12404.1. Section 12404.1.

The furnishing of a preliminary report by any title insurer, controlled escrow company or underwritten title company, without charge to any person, shall constitute a violation of Section 12404. The charge for a preliminary report shall have a reasonable relation to the cost of production of the report but in no event shall it be less than the rate for a standard owners policy, minimum liability, as set forth in the company’s rate schedule. After billing any person for a preliminary report the title insurer, controlled escrow company or underwritten title company shall promptly make a good faith attempt to collect; provided, however, that notwithstanding Section 12404, but without limiting the applicability of that section to other transactions, this charge may be waived or canceled, if the company follows uniform practices as to all customers under like circumstances. (a) After the issuance of the preliminary report, but before the charge is waived or canceled, the files of the issuing company contain a copy of a bona fide sales or exchange agreement, or loan commitment executed by the party or parties in interest relating to the property described in the report, and the sale, exchange, or loan is not consummated. (b) When the preliminary report so furnished contains a lien or encumbrance or other title defect which the issuing company has refused to eliminate from its policy of title insurance or to provide insurance against loss by reason thereof, and another title insurance company has eliminated the lien or encumbrance or other title defect from its policy of title insurance or provided insurance against loss resulting therefrom within a reasonable period of time from the date of the issuance of the preliminary report. The furnishing of the names of owners of record, descriptions of real property, and property characteristics, as defined in Section 408.3 of the Revenue and Taxation Code, shall not be deemed to be a violation of Section 12404, whether provided on individual or multiple properties and whether provided in printed form or by electronic media.

Cal. Insurance Code - INS § 12404.5. Section 12404.5.

As used in this section “personal or controlled insurance” means a policy of title insurance, or insurance as to the identity, due execution and validity of any note or bond secured by mortage, or the identity, due execution, validity and recording of any such mortgage, or any other service afforded by title insurers the rate for which is required to be filed by Article 5.5 (commencing with Section 12401) of this chapter, where the insured or one of the insured under such policy is, or the loss thereunder is payable to, an underwritten title company, a controlled escrow company, or an issuing agent, or (a) If such underwritten or controlled company or issuing agent is a natural person: (1) his spouse, his employer or his employer’s spouse, or (2) any person related to him or the persons mentioned in (1) of this paragraph within the second degree by blood or marriage, or (3) if his employer is a corporation, any person directly or indirectly owning or controlling a majority of the voting stock or controlling interest in such corporation, or (4) if his employer is a partnership or association, any person owning any interest in such partnership or association. (b) If such underwritten or controlled company or issuing agent is a corporation: (1) any person directly or indirectly owning or controlling a majority of the voting stock or controlling interest in such corporation, or (2) any corporation which is directly or indirectly controlled by a person who also controls the underwritten title company, controlled escrow company, or issuing agent, as described in (1), or (3) any corporation making consolidated returns for United States income tax purposes with any corporation described in (1) or (2) of this paragraph. If the fees and charges for personal or controlled insurance so issued in any one calendar year received by an underwritten title company, a controlled escrow company or an issuing agent exceed the fees and charges received for other title insurance issued at the instance or request of such underwritten title company, controlled escrow company or issuing agent in the same year, the excess is an unlawful rebate. Violation of this section by a title insurer shall not be subject to the penalty provided for in Section 12409.

Cal. Insurance Code - INS § 12405. Section 12405.

No title insurer, no controlled escrow company, and no underwritten title company shall make any rebate of any portion of the fee or charge shown by the schedule required by Section 12401.1. No title insurer, no controlled escrow company and no underwritten title company shall quote any fee or make any charge for a title policy to any person which is less than that currently available to others for the same type of title policy in a like amount covering property in the same county and involving the same factors as set forth in its then currently effective schedule of fees and charges. The amount by which any fee or charge is less than that called for by the then currently effective schedule of fees and charges of the title insurer is an unlawful rebate; provided, that nothing contained in this article shall prohibit bulk rates or special rates for customers of prescribed classes if such bulk or special rates are provided for in such schedule.

Cal. Insurance Code - INS § 12405.7. Section 12405.7.

In addition to other acts prohibited by this article, no controlled escrow company or title insurer or other person engaged in the business of selling or furnishing to the public, directly or indirectly, evidence to title to real property shall: (a) Pay for or furnish or offer to pay for or furnish any part of the advertising or promotional material of the customer in connection with the sale or encumbrance of real property. (b) Pay or offer to pay for any evidence of title or copy or contents thereof not produced or issued by such person or company if such evidence of title relates to a current real property transaction, except as provided in Section 12412.

Cal. Insurance Code - INS § 12406. Section 12406.

No title insurer shall issue any title policy in any transaction in connection with which it or any person which is a controlled escrow company or underwritten title company by reason of its relationship with such title insurer has paid or contemplates paying any commission in violation of Section 12404 or in connection with which it or any such controlled escrow company or underwritten title company has made or contemplates making any unlawful rebate in violation of Section 12405.

Cal. Insurance Code - INS § 12406.5. Section 12406.5.

(a) The commissioner shall develop, publish, and disseminate a brochure for consumers who are required to buy title insurance as part of a residential real estate transaction. The brochure shall inform consumers that competing title insurers and underwritten title companies may offer different costs or services for the title insurance required in the transaction. The brochure shall also inform consumers about the potential availability of discounts in cases involving first-time buyers, short-term rates if a home is resold in less than a five-year period, concurrent rates if the company is providing both the homeowners’ and the lenders’ title insurance policies in the transaction, subdivision bulk rates if the property being purchased is in a new subdivision, refinancing discounts, short-term financing rates, and discounts that may be available in other special cases. The brochure shall encourage consumers to contact more than one title insurer or underwritten title company in order to compare costs and services. (b) The brochure developed pursuant to subdivision (a) shall include the department’s toll-free consumer assistance telephone number and shall invite consumers to call the department if they need assistance. (c) The department shall display the brochure developed pursuant to subdivision (a) on its Internet Web site, and the brochure shall include the department’s Internet address. (d) The brochure developed pursuant to subdivision (a) shall also educate consumers about laws involving unlawful commissions and rebates associated with the placement or referral of title insurance and shall encourage consumers to report to the department, to the Bureau of Real Estate, and to any other appropriate government agencies any suspected incidents of probable unlawful commissions or rebates subject to Article 6.5 (commencing with Section 12414). (e) One copy of the brochure developed pursuant to this section shall be made available to a member of the public at no cost, and the department may charge its actual cost for providing additional copies. The brochure shall be made available for reproduction at no cost to any vendor who wishes to publish the brochure as written, provided any vendor who wishes to publish the brochure agrees to submit any documents containing the brochure to the department prior to publication.

Cal. Insurance Code - INS § 12407. Section 12407.

The commissioner, if he has reason to believe that any controlled escrow company or any underwritten title company has violated or is violating any of the provisions of this article, has the power and it is his duty to forthwith examine its books, records and accounts and in making any such examination he has all the power set forth in Article 4, Chapter 1 of Part 2 of Division 1 of this code and any company so examined shall pay to the commissioner the cost of such examination on demand. Whenever the commissioner examines a title insurer, he shall make such examination of its books, records, and files as may be necessary in his judgment to determine whether or not it has violated or is violating any of the provisions of this article.

Cal. Insurance Code - INS § 12408. Section 12408.

Every title insurer shall include in its annual statement furnished the commissioner pursuant to Article 10 (commencing with Section 900), Chapter 1, Part 2, Division 1 of this code, the name of each person which is a controlled escrow company or underwritten title company by reason of its relationship with such title insurer.

Cal. Insurance Code - INS § 12408.1. Section 12408.1.

Whenever a title insurer terminates its underwriting agreement with any underwritten title company, it shall at the same time give notice of the termination to the commissioner.

Cal. Insurance Code - INS § 12408.5. Section 12408.5.

(a) Notwithstanding any other provision of this article no title insurer, no controlled escrow company, and no underwritten title company shall pay any commission for the solicitation or negotiation of any services constituting the business of title insurance. (b) The provisions of subdivision (a) notwithstanding, a title insurer, controlled escrow company, or underwritten title company may pay to full-time salaried employees a commission, incentive compensation or bonuses based on any such employees’ level of production of any services constituting the business of title insurance. Any title insurer, controlled escrow company, or underwritten title company and, where applicable their affiliates, which makes such payments shall maintain adequate records detailing the conditions to receipt of any commission, incentive compensation or bonus, the recipient thereof and the amount paid. (c) Any employee of a title insurer, underwritten title company, or controlled escrow company shall not, directly or indirectly, pay or offer to pay, either directly or indirectly, any part of his or her compensation, whether denominated salary, incentive compensation, or bonuses to any person or entity defined in Section 12404, as an inducement for, or as compensation for, any title insurance business or any escrow or other title business, and any payment or offer to pay this consideration is an unlawful rebate.

Cal. Insurance Code - INS § 12409. Section 12409.

(a) Every title insurer, controlled escrow company, and underwritten title company which pays any commission or which makes any unlawful rebate in violation of this article shall be liable to the people of California for five times the amount of that commission or unlawful rebate, the amount thereof to be recovered by the commissioner pursuant to Section 12976. In addition to, or in lieu of, any other penalty that may be imposed under this code, the commissioner may, after a hearing, issue an order to restrict or suspend the certificate of authority of any title insurer or controlled escrow company or the license of any underwritten title company. The commissioner may restrict or suspend the certificate of authority or license on a statewide basis or in specified counties. (b) In no event shall the total or aggregate amount recovered by the commissioner from a title insurer, controlled escrow company, or underwritten title company pursuant to this section be less than five thousand dollars ($5,000).

Cal. Insurance Code - INS § 12410. Section 12410.

In enforcing any of the provisions of this article, the commissioner shall be entitled to the remedies provided for in Section 12928.6 of this code.

Cal. Insurance Code - INS § 12411. Section 12411.

The commissioner may after a hearing suspend or revoke the certificate of authority of any title insurer or the license of any underwritten title company licensed pursuant to the provisions of Section 12389, which, after 10 days’ written notice from the commissioner requiring it to comply with the provisions of this article willfully fails to do so.

Cal. Insurance Code - INS § 12412. Section 12412.

Nothing in this article prohibits the division of fees or charges, for work and services actually performed, between title insurers or between title insurers and underwritten title companies or between underwritten title companies, if such division does not constitute an unlawful rebate as defined by Section 12404.5, or is prohibited by Section 12405.7 or 12408.5. The entire charge made to obtain a title policy shall be set forth on the title policy.

Cal. Insurance Code - INS § 12413.1. Section 12413.1.

No title insurance company, controlled escrow company, or underwritten title company shall disburse funds from an escrow account until the day established by the following: (a) Except for funds deposited by cash or by electronic payment, deposits accorded next day availability pursuant to Part 229 of Title 12 of the Code of Federal Regulations may not be disbursed until the business day following the business day of deposit. (b) Except for drafts, deposits not accorded next day availability pursuant to Part 229 of Title 12 of the Code of Federal Regulations shall not be disbursed until the day on which these funds must be made available to depositors under the federal regulation specified in this subdivision. (c) Funds deposited by cash or by electronic payment may be disbursed following deposit on the same business day as the business day of deposit. (d) Notwithstanding the provisions of subdivision (b), deposits other than drafts may be disbursed on the business day following the business day of deposit if the financial institution to which the funds have been deposited informs the title insurance company, controlled escrow company, or underwritten title company in writing that final settlement has occurred on the deposited item. For the purposes of this subdivision, an electronically transmitted document that specifies that final settlement has occurred constitutes written notice as to an individual item. (e) Where a draft, other than a share draft, has been received and submitted for collection, no title insurance company, controlled escrow company, or underwritten title company shall disburse funds from an escrow account with respect to the draft until the proceeds of the draft have become available for withdrawal from the financial institution to which the draft has been submitted for collection. For purposes of this subdivision, “available for withdrawal” means when the draft has been submitted for collection and payment received. Notwithstanding this subdivision, disbursement of funds represented by share drafts shall be governed by subdivisions (b) and (d), if applicable. (f) For purposes of this section, “escrow account” means any depository account with a financial institution to which funds are deposited with respect to any transaction wherein one person, for the purpose of effecting the sale, transfer, encumbering or leasing of real or personal property to another person, delivers any written instrument, money, evidence of title to real or personal property, or other thing of value to a third person to be held by that third person until the happening of a specified event or the performance of a prescribed condition, when it is then to be delivered by that third person to a grantee, grantor, promisee, promisor, obligee, obligor, bailee, bailor, or any agency or employee of the latter. (g) Except as provided in subdivision (h), for purposes of this section, any word or term used herein or relevant to interpretation of this section, including, but not limited to, “available for withdrawal,” “check,” “electronic payment,” and “business day,” which is defined in Part 229 of Title 12 of the Code of Federal Regulations on January 1, 1990, shall have the meaning there given as the regulations existed on January 1, 1990. (h) For purposes of this section, “financial institution” means any financial institution specified in Section 12413.5. (i) No title insurance company, controlled escrow company, or underwritten title company shall be liable for a violation of this section if the violation was not intentional or resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid that error. Examples of bona fide errors include, but are not limited to, clerical, calculation, computer malfunction and programming, and printing errors. (j) Nothing in this section shall be deemed to prohibit the recordation of documents prior to the time funds are available for disbursement with respect to a transaction provided the parties to the transaction consent in writing prior thereto. (k) Nothing in this section is intended to amend, alter, or supersede other sections of this code, or other laws of this state or the United States, regarding an escrow holder’s duties and obligations.

Cal. Insurance Code - INS § 12413.2. Section 12413.2.

Any item or draft received by a title insurance company, controlled escrow company, or underwritten title company in connection with any escrow shall be deposited in, or submitted for collection to, a financial institution as defined in Section 12413 no later than the close of the next business day following receipt. For purposes of this section, “item” means any check, including a cashier’s check, negotiable order of withdrawal, share draft, traveler’s check, or money order.

Cal. Insurance Code - INS § 12413.5. Section 12413.5.

All funds received in connection with any escrow conducted by a title insurance company, controlled escrow company, or underwritten title company shall be deposited in a separate depository account in a bank or savings and loan association or in an account in an industrial loan company insured by the Federal Deposit Insurance Corporation, and the funds so deposited shall be the property of the person or persons entitled thereto under the provisions of the escrow and segregated escrow by escrow in the records of the title insurance company, controlled escrow company, or underwritten title company. The funds shall not be subject to any debts of the title insurance company, controlled escrow company, or underwritten title company and shall be used only to fulfill the terms of the individual escrow for which the funds were accepted and none of the funds shall be utilized until the conditions of the escrow have been met. Any interest received on funds deposited in connection with any escrow which are deposited in a bank, savings and loan association, or industrial loan company shall be paid over by the escrow to the depositing party to the escrow unless the escrow is otherwise instructed by the depositing party, and shall not be transferred to the account of the title insurance company, controlled escrow company, or underwritten title company.

Source: CA Legislative Counsel Bulk DataURL: https://downloads.leginfo.legislature.ca.gov/pubinfo_2025.zipFetched: 6/27/2026