The Texas Department of Insurance notes the recent upsurge in mergers and acquisitions in the title insurance industry. Questions have arisen about the licensing of escrow officers who may perform services for more than one title agent or direct operation.
We are guided by Texas Insurance Code Arts. 9.02(g) and 9.41-9.43. These sections of the Code clearly link escrow officers to particular title agents and direct operations. Licensing of an escrow officer is tied to whether the applicant is a "bona fide employee of a direct operation, or bona fide employee of a title insurance agent." Therefore, a separate license for each title agent/direct operation will be required, regardless of whether the title agents/direct operations share common ownership. On escrow officer applications and renewal applications wherein the escrow officer holds or will hold more than one license, the escrow officer must be a bona fide employee of the title agents/direct operations for whom the escrow officer is or will be licensed.
We will follow Texas law in interpreting "bona fide employee" to mean a person in the service of another under a contract of hire, express or implied, where the employer has the power or right to control or direct the employee in how the work is being performed. We will look to indicia such as payment from the agent, a compensation agreement, the job function actually being performed, and existence on the agent´s payroll in questionable cases.
We are aware that individuals are sometimes hired to work in an abstract plant or in other areas during temporary staff shortages. This must not be abused. Article 9.30(A) prohibits the giving or receiving of a thing of value in return for the referral of title business. Article 9.30(B) exempts the payment of compensation to a bona fide employee principally employed by a title insurance company for goods or facilities actually furnished and received. We read "bona fide employee principally employed by a title insurance…agent" in Article 9.30(B)(3) as prohibiting unlicensed producers from being used on a per transaction basis merely to share in a split of title insurance premiums which would otherwise be a rebate. A contract that is a mere sham, designed to conceal the true legal relationship between the parties, does not define the relationship.
Please feel free to contact me at 512-322-3482 should you have any questions.
Robert R. Carter, Jr.
Deputy Commissioner - Title Division