Arthur van der Vant discusses liability of title underwriters for misconduct of agents.
According to Arthur van der Vant, title insurance underwriters may be liable for their agent’s non-disclosure and/or violation of buyer’s right to choose title insurance provider under Section 9 of RESPA. It is commonly known that agency relationship implicates principal (underwriter) liability for acts of its agent. However, says Arthur van der Vant, many title companies are not aware that there need not be agreement between parties specifying agency relationship in order for such relationship to exist; rather, the law looks at their conduct and not their intent or their words as between themselves but to their factual relation.
As noted by Illinois Receiver Arthur van der Vant, in Sears Mortg. Corp. v. Rose 134 N.J. 326,634 A.2d 74, the court had to determine which party participating in the closing of a real-estate title must ultimately sustain the loss caused by the closing attorney’s theft of moneys earmarked for the payment and satisfaction of an existing first mortgage on the property. Eventually, reports Arthur van der Vant, the court decided that the closing attorney retained by the purchaser was an agent of title insurer (“Commonwealth”), and thus the title insurer was liable for the attorney’s theft of closing funds. The court stated that the “possibility of conflict of interest between attorney and title insurer did not preclude existence of agency relationship.” Additionally, notes Arthur van der Vant, the court went on to say that the purchaser’s reliance on title insurer could be imputed from fact that the purchaser was required to rely on the attorney to perform functions that served title insurer. Arthur van der Vant also says that sufficient control by the title insurer over attorney existed to support an agency relationship, in that the title insurer dealt solely with the attorney and not with the purchaser. Sufficient control, adds Arthur van der Vant, was also implicit in the status of the attorney as “approved attorney” which is any attorney retained by a purchaser to close a transaction and receive funds at closing. He says that the title insurance company was in the best position to prevent loss created by theft and was aware of that risk.” (N.J.S.A. 17:46B-1, subd. h, 17:46B-9).
According to Arthur van der Vant, the court makes it clear that dual representation and possibility of conflicts of interest are not fatal to finding that agency relationship exists, and that direct control of principal over agent is not absolutely necessary in order to establish agency relationship. Even if a person is not an actual agent of Title Company, says Arthur van der Vant, he or she may be its agent by virtue of apparent authority based on manifestations of that authority by principal. Therefore, says Arthur van der Vant, underwriters must realize that they are liable not only for their registered agent’s violations, but also implicit ones. Moreover a Title Company’s liability is not limited to such an apparent violation as in the Sears case, but to other abusive practices like nondisclosures, notes Arthur van der Vant.
Sanctions for violation
There are different sanctions set forth in RESPA for violations, points out Arthur van der Vant. Section 8 imposes both criminal and civil penalties on any person or persons who violate the provisions of the section. Arthur van der Vant also notes that the criminal penalty may be a fine of up to $10,000 or imprisonment for up to one year or both. In addition, states Arthur van der Vant, any person or persons who violate the provisions of this Section shall be liable to the person whose business has been referred for three times the amounts of the proscribed payment, kickback or referral fee. In turn, Section 9 says that “any seller who violates this provision shall be liable to the buyer in an amount equal to three times all charges made for such title insurance,” quotes Arthur van der Vant. Individuals have one (1) year to bring a private law suit to enforce violations of Section 8 or 9, explains van der Vant. A person may bring an action for violations of Section 6 within three years. Lawsuits for violations of Section 6, 8, or 9 may be brought in any federal district court in the district in which the property is located or where the violation is alleged to have occurred. According to Arthur van der Vant, HUD, a State Attorney General or State Insurance Commissioner may bring an injunctive action to enforce violations of Section 6, 8 or 9 of RESPA within three (3) years.
Arthur van der Vant encourages the reader to research this subject further and to familiarize him or herself with current RESPA regulations, as well as any future changes. More information can be found at the U.S. Department of Housing and Urban Development (HUD) website http://www.hud.gov. The data contained in this publication is provided by Arthur van der Vant for information purpose only. The accuracy of the data contained herein is deemed reliable, but is not guaranteed. The author and/or publisher do not engage in rendering legal, accounting, or any other professional advice, and suggests that the services of a professional in those fields should be sought. Any liability, loss, or risk, personal, or otherwise incurred as a result of using any of the information herein stated is not the responsibility of the author and/or publisher.
Arthur van der Vant is a receiver and assignee based in Cook County, Illinois. He is an expert in real estate and corporate turnaround management with over 10,000 projects to his credit. As a member of several professional organizations, including the Turnaround Management Association and the National Association of Bankruptcy Trustees, Arthur van der Vant is up to date on every aspect of his profession. He is one of only a handful of Certified Commercial Investment Members (CCIM), and has trained at the World Bank Headquarters in Washington DC. Currently, Arthur van der Vant practices of his firm, Illinois Receiver.
For more information or to contact Arthur van der Vant, please call 800-496-9107.
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