OLR Bill Analysis

SB 277

AN ACT CONCERNING THE ISSUANCE OF CLOSING PROTECTION LETTERS.

SUMMARY:

This bill requires title insurers to issue closing protection letters (CPLs) for any loan insurance policy insuring a lender's interest on a one-to-four unit residential building, and allows them to issue CPLs for other types of residential or commercial property. In practice, a CPL is a contract between a title insurer and a real estate buyer, borrower, lessee, or lender indemnifying against any actual loss of settlement or closing funds caused by such things as fraud, theft, and misappropriation.

By law, a title insurer may issue a CPL to guarantee the obligations of its agents in the normal course of business. The bill expands the purpose of a CPL to include guaranteeing the title insurer's obligations and the obligations of its agents and affiliates.

The bill allows title insurers to charge a fee for issuing a CPL, but the insurance commissioner must approve the fee. It prohibits a title insurer from sharing a CPL fee with a title insurance agent.

The bill also requires title insurers to file CPLs with the insurance commissioner for his review and approval. The commissioner must approve a CPL if it (1) is logical, clearly arranged, and understandable to people of normal intelligence without insurance or legal knowledge or training; (2) does not contain inconsistent, ambiguous, or misleading clauses, exceptions, or conditions deceptively affecting the risk assumed; (3) does not contain misleading titles, headings, or other indications of coverage; (4) is legibly printed or reproduced; and (5) otherwise complies with the Connecticut Title Insurance Act.

EFFECTIVE DATE: October 1, 2014

COMMITTEE ACTION

Insurance and Real Estate Committee

Joint Favorable