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Bulletin No. 2002-03-INS

Guideline for the regulation of Title Insurers and Title Insurance Agency Escrow Accounts

Issued and entered June 25, 2002 by Frank M. Fitzgerald, Commissioner of Financial and Insurance Services 

Separate Escrow Accounts

Section 7304 of the Code, MCL 500.7304, allows title insurers and title insurance agents to accept monies to be held in escrow until the closing of any real estate transaction involving the issuance of a title insurance policy. Section 1207(2) of the Code, MCL 500.1207, requires that agents use reasonable accounting methods to record funds received in a fiduciary capacity including the receipt and distribution of all premiums due each of his or her insurers.

The Commissioner has determined that title insurers and title insurance agents often hold earnest money deposits in escrow for real estate transactions involving issuance of a title insurance policy, as permitted by Section 7304 of the Code. However, upon examination by Office of Financial and Insurance Services (OFIS) investigators, the Commissioner has learned that title insurers and agents holding the escrow funds often do not keep those monies separate, using reasonable accounting methods, from other business accounts used to pay premiums and business expenses for the office.

This guideline has been developed to state a policy the Commissioner intends to follow to determine compliance by a title insurers and a title insurance agent accepting escrow funds with Section 1207(2) of the Code.

The Commissioner will find escrow accounts of title insurers and title insurance agencies in compliance with Section 1207(2) of the Code if:

  1. There is a separate account containing only escrow funds.
  2. The escrow account is in a bank, savings and loan, credit union or other recognized depository institution.
  3. Escrow funds are accounted for separately and procedures established to clearly identify the specific amount of money held in each insurer's and agent's escrow account, the date the money was deposited, the owner of the money, the name of the buyer or seller entitled to interest, if any, on the money, the condition warranting disbursement of the money, the expected disbursement date, and the actual disbursement date.
  4. The escrow accounts records coordinate or track to the title commitment and policy number.

Substantial penalties may be imposed for the violation of any part of this section. Upon finding a violation of Section 1207(2), the Commissioner will issue a cease and desist order, may revoke or suspend the license of the insurer or agency involved, and can impose the following penalties:

  1. Civil fines of $1,500.00 for each knowing violation, up to an aggregate fine of $10,000.00 for all violations committed in a six month period.
  2. Refund of any overcharges.
  3. Restitution to cover incurred losses, damages, or other harm attributable to the violation.

The Commissioner recognizes that title insurers and title insurance agents ordinarily will hold funds in escrow under the terms of a written Buy/Sell agreement for the sale of land involving also the issuance of a title insurance policy. If a title insurer or title insurance agent expects to retain any escrow monies after closing of the real estate transaction, the terms of such retention ordinarily will not be specified in the Buy/Sell Agreement, but the insurer or agent will continue to hold the monies as a fiduciary, subject to the reasonable accounting methods or procedures specified above. In this circumstance, the Commissioner strongly encourages the insurer or agent to enter into a new, written escrow agreement, containing all the information listed above and being particularly careful to identify clearly the condition warranting disbursement of the escrow monies.


This guideline is effective September 1, 2002. Under Section (3)6 of the Administrative Procedures Act of 1969, MCL 24.203(6), this guideline states a policy which the agency intends to follow, which does not have the force or effect of law, and which binds the agency, but does not bind any other person.

The Office of Financial and Insurance Services shall use this guideline in reviewing all complaints and investigations concerning escrow funds held by Title Insurance Agencies or Title Insurance Companies.

Any questions regarding this bulletin should be directed to:

Office of Financial and Insurance Services
Market Conduct Review
611 West Ottawa Street
P.O. Box 30220
Lansing, Michigan 48909-7720

Phone: (517) 373-0961
Toll Free: (877) 999-6442