IDFPR Again Delays Implementation of the Proposed DS-1 Disclosure for Producers of Title Insurance Business

New Implementation Date is July 1, 2018

ATG Illinois Agents: Until further notice, continue to use the old form.

On April 3, 2018, the Title Insurance Division of the Illinois Department of Financial and Professional Regulation (IDFPR or the Department) proposed a new disclosure form to be executed by title insurance agents and underwriters when title insurance is referred by a "producer" as defined under the Title Insurance Act. The form had an effective date of April 4, 2018.

ATG had serious concerns with the form and, through counsel, commented on the proposed form to the Department in our May 4 letter. We followed that letter with a meeting with the Department to express our concerns and provide guidance.

On May 21, 2018, the Department released a new draft DS-1 Disclosure form and instructions (see Exhibit A and Exhibit B attached below). While the new form represents a significant improvement over the original form, it still needs work. We have submitted our comments on the new form and instructions (see Exhibit C and Exhibit D attached below) and are hopeful that the Department will continue to cooperate with ATG and others in the industry to develop a form that accomplishes their objective of improving consumer disclosure while also ensuring that consumers have access to legal counsel in real estate transactions and making it practical for the industry to implement.

Among our chief concerns with the new form:

• The disclosure and accompanying instructions still single out lawyers over other "producers."
• Requiring underwriters to execute the form is beyond the Department's statutory authority.
• It appears the reference to Section 24 of the Title Insurance Act, which contains a prohibition on “discounted attorney fees,” is cited for the proposition that a lawyer cannot discount fees to a consumer when in fact, that provision is a prohibition of discounts between settlement service providers. 215 ILCS 155/24.

While we believe that a lawyer representing a client, examining title, and issuing a title insurance policy is not "referring" title insurance to an agency and arguably may not be subject to the provisions of this disclosure requirement under the Act, lawyers acting in this capacity do have disclosure obligations under the Illinois Code of Professional Responsibility. The state disclosure form (called the DS-1) is one effective way to fulfill that obligation.

We will continue to work with the Department, our counsel, and others in the industry to ensure that the disclosure is meaningful and practical to implement. We applaud the IDFPR for taking meaningful steps to protect consumers, and we encourage them to continue to work with the industry and to use the powers it currently has to enforce existing laws when it encounters bad actors in the industry.

We welcome your feedback, please feel free to Contact Us about this important matter.