HOUSE BILL REPORT

SB 5739

As Amended by the House

BYSenators Vognild, Warnke and Smitherman

Revising requirements for escrow agents for bonds and errors and omissions policies.

House Committe on Financial Institutions & Insurance

Majority Report:  Do pass with amendment.  (12)

      Signed by Representatives Lux, Chair; Zellinsky, Vice Chair; Betrozoff, Chandler, Crane, Day, Dellwo, Ferguson, P. King, Meyers, Nutley and Winsley.

House Staff:Harry Reinert (786-7110)

AS PASSED HOUSE APRIL 9, 1987

BACKGROUND:

Escrow agents operating in the state are required to hold a certificate of registration issued by the Department of Licensing.  Certificated agents must have a fidelity bond, which protects the agent, and an errors and omissions policy, which protects the consumer.  The errors and omissions insurance policy may be cancelled upon 30 days notice to the director of Licensing and the escrow agent.  Banks, trust companies, mutual savings banks, savings and loans, credit unions, insurance and title insurance companies, agencies or lending institutions approved under the National Housing Act, attorneys, real estate brokers and agents who do not charge a fee, and bankruptcy trustees are exempt from these requirements.

The director of Licensing, with the concurrence of the insurance commissioner, may determine that fidelity bonds and errors and omissions policies are cost prohibitive, or are not reasonably available to a substantial number of certificated escrow agents.  In this circumstance, an association of escrow agents may be authorized to organize a mutual corporation for the purposes of protecting the agents and the consumer against losses arising from escrow transactions.  In addition, the bond and error and omissions policy requirements may be waived.  Both the mutual corporation and the waivers may exist for a fixed time period not to exceed 90 days after the end of the next regular session of the legislature.

SUMMARY:

Escrow agents required to register with the Department of Licensing are only required to have an errors and omissions policy.  The errors and omissions policy may be cancelled upon 45 days notice, the same period as for other insurance policies.  The fidelity bond requirement is eliminated.

The time limit on the existence of the mutual corporation is eliminated.

The time limit for a waiver of the errors and omissions policy is changed to one year.  The director of Licensing may grant a renewal of the policy waiver.

A procedure and criteria are established which allow the director to issue a certificate of waiver.  A new applicant applying for a certificate of registration may apply for a certificate of waiver.

RCW 18.44.060, which requires a new fidelity bond if the old one is cancelled, is repealed.

Fiscal Note:      Attached.

House Committee ‑ Testified For:    Hugh Hawkins, Vice President, State Escrow Association, Jan Remillong, Escrow Association of Washington.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    The fidelity bond requirement is only for the protection of the owner of the business and imposes an unnecessary burden on small escrow agents.

House Committee - Testimony Against:      None Presented.