Bulletin: CO2017001

Dear Associates:

Effective March 15, 2017, the Colorado Division of Insurance has issued a new Regulation 8-1-4 regarding title insurance fiduciary duties. Among other things, the new Regulation revises and expands the duties of all title entities with respect to the acceptance and handling of fiduciary funds. This bulletin summarizes Sections 5 and 6 of Regulation 8-1-4, but please refer to the new Regulation for specifics.

Regulation 8-1-4 updates and replaces Section 9 of former Regulation 3-5-1. Many of the provisions of the new Regulation are similar to those found in former Regulation 3-5-1. Among the changes is an update to the definition of “fiduciary of funds”. The definition now includes not only underwriter portions of premiums, earnest money deposits, loan proceeds, sellers’ proceeds, and homeowners association's dues, but also any other funds received as part of a title entity conducting closing and settlement services.

In addition, Regulation 8-1-4 now requires that, unless consented to in writing by all necessary parties, any fiduciary funds, other than earnest money, held by a title entity shall be disbursed for the purpose that the funds were collected or returned to the depositing party within 120 days of the closing of the transaction.

There has also been a small change with respect to earnest money being held after a transaction fails to close. Previously, absent written instructions, uncontested funds could be returned to the depositing party after 180 days. That time period has now been reduced to 120 days.

The Regulation also establishes new rules regarding the reconciliation of fiduciary accounts. All title insurance agents and agencies must now reconcile all fiduciary and similarly identified accounts at least once every forty-five (45) days. The failure to conduct timely reconciliations may result in further enforcement actions by the Department of Insurance.

Finally, and most importantly, Section 6 of the Regulation establishes a new and extensive reporting requirement for underwriters. Underwriters are now required to report to the Division of Insurance if they learn of certain actions taken by title agents. Those actions include an agent’s failure to timely remit premiums or an agent’s failure to reconcile their fiduciary accounts at least every 45 days. Underwriters must also report to the Division if they learn that a title agent has a shortage of more than $10,000 in any fiduciary account or if the underwriter becomes aware that a title agent is commingling fiduciary funds with other accounts. 

Regulation 8-1-4 can be viewed by clicking on the following link: Regulation 8-1-4

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

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