October 2011 Vol. 4, No. 9

Underwriters' Bulletin

Procedural Updates

Title Agents and Rule 1.15

Just last month, the Illinois Supreme Court revised Rule 1.15 of the Illinois Rules of Professional Conduct, causing real estate attorneys to re-consider the setup and maintenance of their closing accounts.The In re Pisula case raises issues related to those closing accounts and provides some answers to questions ATG agents have been asking, as follows:

  1. The Attorney Registraiton and Disciplinary Commission (ARDC) Hearing Board identified a fiduciary relationship between the title insurance agent and title insurance underwriter.

  7. The Hearing Board found that the fiduciary relationship required that the title agent keep the underwriter's funds separate from the title agent's funds, not in the title agent's operating account.

  13. The title insurance underwriter is a third party under the terms of Rule 1.15, and the title agent must comply with Rule 1.15 in handling the underwriter's funds.

In this case, the title agent was a separate Illinois business corporation from the attorney's law practice, and the attorney was the sole owner of the title agent corporation. The ARDC applied Rule 1.15 to the corporate title agent's handling of its escrow account. The issue of the ancillary business was not argued in the case, nor discussed in the opinion, so we have no additional guidance about how the Rules of Professional Conduct are applied to ancillary businesses. However, the case demonstrates a risk if attorney-owned corporate or LLC title agencies do not adhere to Rule 1.15's requirements.

© ATG|Casenotes/Bulletin 1110_v4n9

[Last update: 10-17-11]