CHAPTER 26 HOUSE BILL No. 2677 An Act relating to insurance; concerning title insurance; amending K.S.A. 1999 Supp. 40-1137 and repealing the existing section. Be it enacted by the Legislature of the State of Kansas:

      Section  1. K.S.A. 1999 Supp. 40-1137 is hereby amended to read as
follows: 40-1137. A title insurance agent may operate as an escrow, set-
tlement or closing agent, provided that:

      (a) All funds deposited with the title insurance agent in connection
with an escrow, settlement or closing shall be submitted for collection to,
invested in or deposited in a separate fiduciary trust account or accounts
in a qualified financial institution no later than the close of the next busi-
ness day, in accordance with the following requirements:

      (1) The funds shall be the property of the person or persons entitled
to them under the provisions of the escrow, settlement or closing agree-
ment and shall be segregated for each depository by escrow, settlement
or closing in the records of the title insurance agent in a manner that
permits the funds to be identified on an individual basis;

      (2) the funds shall be applied only in accordance with the terms of
the individual instructions or agreements under which the funds were
accepted; and

      (3) an agent shall not retain any interest on any money held in an
interest-bearing account without the written consent of all parties to the
transaction.

      (b) Funds held in an escrow account shall be disbursed only:

      (1) Pursuant to written authorization of buyer and seller;

      (2) pursuant to a court order; or

      (3) when a transaction is closed according to the agreement of the
parties.

      (c) A title insurance agent shall not commingle the agent's personal
funds or other moneys with escrow funds. In addition, the agent shall not
use escrow funds to pay or to indemnify against the debts of the agent or
of any other party. The escrow funds shall be used only to fulfill the terms
of the individual escrow and none of the funds shall be utilized until the
necessary conditions of the escrow have been met. All funds deposited
for real estate closings, including closings involving refinances of existing
mortgage loans, which exceed $2,500 shall be in one of the following
forms:

      (1) Lawful money of the United States;

      (2) wire transfers such that the funds are unconditionally received by
the title insurance agent or the agent's depository;

      (3) cashier's checks, certified checks, teller's checks or bank money
orders issued by a federally insured financial institution and uncondition-
ally held by the title insurance agent;

      (4) funds received from governmental entities, federally chartered
instrumentalities of the United States or drawn on an escrow account of
a real estate broker licensed in the state or drawn on an escrow account
of a title insurer or title insurance agent licensed to do business in the
state; or

      (5) other negotiable instruments which have been on deposit in the
escrow account at least 10 days.

      (d) Each title insurance agent shall have an audit made of its escrow,
settlement and closing deposit accounts, conducted by a certified public
accountant or by a title insurer for which the title insurance agent has a
licensing agreement, according to the following schedule. Audits shall be
considered current if dated within the 12 months prior to submission of
the audit as required herein. The title insurance agent shall provide a
copy of the audit report to the commissioner and to each title insurance
company which it represents within 160 days after the close of the cal-
endar year for which an audit is required. Title insurance agents who are
attorneys and who issue title insurance policies as part of their legal rep-
resentation of clients are exempt from the requirements of this subsec-
tion. However, the title insurer, at its expense, may conduct or cause to
be conducted an annual audit of the escrow, settlement and closing ac-
counts of the attorney. Attorneys who are exclusively in the business of
title insurance are not exempt from the requirements of this subsection.
Audits shall be required as follows:

      (1) Annual audit required in counties having a population of 40,001
and over;

      (2) biennial audit required in counties having a population of
20,001-40,000; and

      (3) triennial audit required in counties having a population of 20,000
or under.

      (e) The commissioner may promulgate rules and regulations setting
forth the standards of the audit and the form of audit report required.

      (f) If the title insurance agent is appointed by two or more title in-
surers and maintains fiduciary trust accounts in connection with providing
escrow and closing settlement services, the title insurance agent shall
allow each title insurer reasonable access to the accounts and any or all
of the supporting account information in order to ascertain the safety and
security of the funds held by the title insurance agent.

      (g) Nothing in this section is intended to amend, alter or supersede
other laws of this state or the United States, regarding an escrow holder's
duties and obligations.

      Sec.  2. K.S.A. 1999 Supp. 40-1137 is hereby repealed.

 Sec.  3. This act shall take effect and be in force from and after its
publication in the statute book.

Approved March 22, 2000.
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