Title insurance agents owe their clients the fiduciary duties of loyalty, disclosure, care, and confidentiality. They must always act with the utmost good faith. Fiduciaries must avoid any acts of self-dealing that place personal interests in conflict with their beneficiaries. In the title company context, the duty arises from closing a title insurance contract (issuing the title insurance policy) and closing the business transaction.
Title insurance agents are prohibited from advancing any interests adverse to their principal’s interest or conducting their principal’s business in such a way as to benefit a customer, a subagent, the agent, or any other party to the detriment of the principal’s interest. Furthermore, agents are prohibited from communicating personal information about their principals that were given to or acquired by the agent within the scope of employment as an agent to the principal. Personal information must be kept confidential unless the client explicitly releases the agent from this duty in writing.
Agents have a duty to use reasonable efforts to provide material information to the principal. Pursuit of self-interest is disallowed, and general fiduciary principles require that an agent refrain from using his position to benefit himself. This protects the principal from the vulnerability that any relationship of agency creates by exposing the principal’s property or general interests to the risk of the agent’s self-interested action. An agent who has received information from a principal for a precise purpose breaches his fiduciary duty by using that information in a manner to which the principal does not explicitly consent in writing. An agent may be subject to post-termination duties applicable to the agent’s use of confidential information provided by the principal or otherwise acquired in the course of the agency relationship.
Who Regulates Title Companies in Florida?
A title agent is one of four occupations permitted to hold escrow funds in Florida. The title industry is regulated by RESPA, the Real Estate Settlement Procedures Act, in addition to the Office of Financial Regulation, and the Florida Department of Business and Regulation. RESPA’s general purpose is to eliminate kickbacks, self-dealing, and upcharges. Escrow agents should not have any vested interest in the earnest money deposit they hold during a transaction.
Florida Administrative Code Regulation Section 69B-186.010 is titled Unlawful Rebates and Inducements Related to Title Insurance Transactions. This regulation deals specifically with limitations for “referrers of settlement services.” The language here is purposefully broad and encompasses title agents and agencies, realtors and real estate brokers, mortgage brokers, bankers, attorneys, sales associates, developers, surveyors, escrow agents, and closing agents. Almost anyone who is involved with a real estate transaction can be held liable for dishonest practices, or “unlawful inducements” under this statute. Generally, an inducement refers to a pledge or promise that causes an individual to enter into a particular agreement. An inducement is any kind of incentive or motivation that would persuade a customer to purchase or do something.
All title insurance agents should be aware of their fiduciary duties and diligently adhere to them. Fiduciaries should err on the side of disclosure and conflict prevention whenever possible. Even unintentional departures from your obligations could leave you vulnerable to claims such as negligent breach of fiduciary duty. If there is any uncertainty, you can explain the potential conflict in writing and direct it to the Division of Insurance Agent and Agency Services. You should seek a response that contains the seal of Florida and keep it in a safe place in case any issues arise.