California Financial Code 17314 – (a) Fidelity Corporation shall pay a member for loss of trust …
(a) Fidelity Corporation shall pay a member for loss of trust obligations subject to the limitations set forth in this chapter. Fidelity Corporation shall pay or deny the claim within 90 days of receipt of the proof of loss filed by a member, or a member’s successor in interest. Notwithstanding any other provision of this article, the protection to members provided by Fidelity Corporation and by the fidelity bond or insurance policy, if any, shall not extend to any transaction involving any member at any branch or business location outside the State of California, but shall extend only to escrow trust obligations and trust funds located within the State of California.
(b) Coverage shall be provided to members in accordance with the following schedule:
Terms Used In California Financial Code 17314
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Escrow: Money given to a third party to be held for payment until certain conditions are met.
- Monthly average escrow liability: as used in this chapter , means the average escrow liability for the 12-month period as reported in the most recent report made by the member to the commissioner pursuant to Section 17348. See California Financial Code 17305
- Trust account: A general term that covers all types of accounts in a trust department, such as estates, guardianships, and agencies. Source: OCC
- Writing: includes any form of recorded message capable of comprehension by ordinary visual means. See California Financial Code 8
|
MONTHLY AVERAGE ESCROW |
COVERAGE |
|
$0 – $? 1,000,000 |
$1,000,000 |
|
over $1,000,000 – $? 3,000,000 |
$2,000,000 |
|
over $3,000,000 – $? 5,000,000 |
$3,000,000 |
|
over $5,000,000 – $? 7,500,000 |
$4,000,000 |
|
over $7,500,000 – $10,000,000 |
$5,000,000 |
Pursuant to the schedule, the minimum coverage by Fidelity Corporation for each licensed location shall be one million dollars ($1,000,000) and the maximum coverage for each licensed location shall be five million dollars ($5,000,000).
(c) A member shall maintain minimum coverage in accordance with the schedule in subdivision (b) and shall monitor its escrow liability monthly. An increase in escrow liability above the monthly average escrow liability coverage as provided for in subdivision (b) shall be reported immediately to Fidelity Corporation. Upon receipt of this report, Fidelity Corporation shall immediately provide for the increase in coverage, and shall immediately bill and collect pursuant to Section 17321, an amount necessary to provide for the increased coverage.
(d) Any member with a licensed location or locations with a monthly average escrow liability greater than ten million dollars ($10,000,000) shall obtain a bond from a corporate surety which is an admitted insurer in the State of California insuring the balance of trust funds not covered by Fidelity Corporation, in a ratio of one dollar of coverage for every three dollars of trust obligations not covered by Fidelity Corporation. The Fidelity Corporation shall have the authority to obtain the excess coverage bond. The cost of the bond shall be shared pro rata by those members included in the coverage.
(e) If a member establishes, to the satisfaction of the commissioner, that a bond is not available or is impracticable under subdivision (d), then, at the member’s election, either:
(1) The member shall place average trust obligations in excess of ten million dollars ($10,000,000) in a restricted escrow trust account. Each transfer or release of the funds to be made by specific resolution of the member’s board of directors and the signature of a neutral third party; or
(2) The licensed location of the member with average trust balances in excess of ten million dollars ($10,000,000) shall be subject to examinations to be conducted at a frequency as deemed appropriate and necessary by the commissioner or Fidelity Corporation, but not less frequently than once a year.
(f) Any member subject to subdivision (e) shall within 10 business days after the effective date of this section notify Fidelity Corporation of its election. A member who subsequently becomes subject to subdivision (e) shall within a like period of time notify Fidelity Corporation of its election. Fidelity Corporation shall also be notified of any change of election in a like period of time. Fidelity Corporation shall notify the commissioner within 10 business days of receipt of any notice under this subdivision of the elections made. All notices under this subdivision shall be in writing.
(Amended by Stats. 2004, Ch. 180, Sec. 1. Effective January 1, 2005.)