Arizona Laws 6-841.02. Liability of title insurer; closing protection letter; definition
A. A real property escrow agent that is a title insurance agent shall disclose to the buyer and seller of a residential dwelling that the title insurer shall offer on request a closing protection letter that provides protection for the loss of escrow monies due to fraud or dishonesty of the escrow agent. This disclosure requirement applies only to transactions involving a buyer and seller of a residential dwelling and shall be made when the buyer or seller employs the escrow agent.
Terms Used In Arizona Laws 6-841.02
- Division: means the financial institutions division within the department. See Arizona Laws 6-101
- Escrow: Money given to a third party to be held for payment until certain conditions are met.
- Escrow: means any transaction in which any escrow property is delivered with or without transfer of legal or equitable title, or both, and irrespective of whether a debtor-creditor relationship is created, to a person not otherwise having any right, title or interest therein in connection with the sale, transfer, encumbrance or lease of real or personal property, to be delivered or redelivered by that person upon the contingent happening or nonhappening of a specified event or performance or nonperformance of a prescribed act, when it is then to be delivered by such person to a grantee, grantor, promisee, promisor, obligee, obligor, bailee or bailor, or any designated agent or employee of any of them. See Arizona Laws 6-801
- Escrow agent: means any person engaged in the business of accepting escrows. See Arizona Laws 6-801
- Fraud: Intentional deception resulting in injury to another.
- Lien: A claim against real or personal property in satisfaction of a debt.
- Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Person: includes a corporation, company, partnership, firm, association or society, as well as a natural person. See Arizona Laws 1-215
- Property: includes both real and personal property. See Arizona Laws 1-215
- Real property: Land, and all immovable fixtures erected on, growing on, or affixed to the land.
- Settlement: Parties to a lawsuit resolve their difference without having a trial. Settlements often involve the payment of compensation by one party in satisfaction of the other party's claims.
B. If an escrow agent licensed pursuant to this chapter does not make the disclosure prescribed by this section, the title insurer shall reimburse the buyer or seller, as applicable, for any escrow monies that are lost. The title insurer’s obligation pursuant to this subsection shall be as set forth in the title insurer’s standard closing protection letter.
C. A title insurer may also provide a closing protection letter to any person that is a party to a transaction in which a title insurance policy will be issued.
D. Under the terms and conditions of the closing protection letter as issued by the title insurer, a closing protection letter may indemnify a person insured under a title insurance policy against a loss that results from the following actions of a policy-issuing title insurance agent or other settlement service provider who has been approved by the title insurer for such protection:
1. Theft or misappropriation of settlement monies in connection with a transaction in which a title insurance policy will be issued by or on behalf of the title insurer issuing the closing protection letter, but only to the extent that the theft relates to the status of the title to that interest in land or to the validity, enforceability and priority of the lien of the mortgage on that interest in land.
2. As to a buyer or lender, failure to comply with the written closing instructions when agreed to by the settlement agent, title insurance agent or employee of the title insurer, but only to the extent that the failure to follow the instructions relates to the status of the title to that interest in land or to the validity, enforceability and priority of the lien of the mortgage on that interest in land.
E. A title insurer must charge a party receiving a closing protection letter a fee. The title insurer earns the fee on the closing of the transaction, and the fee is not subject to any agreement requiring a division of fees or premiums collected on behalf of the title insurer. The fee for each closing protection letter shall not exceed twenty-five dollars for the protection of a party receiving the benefit of closing protection, the buyer, borrower or seller and the lender, in connection with the real property transaction giving rise to the issuance of the closing or settlement protection.
F. A title insurer may not provide any other protection that purports to indemnify against improper acts or omissions of a person with regard to settlement or closing services.
G. For the purposes of this section, "residential dwelling" means an owner occupied structure or an investment property that is designed for residential use by four or fewer families.