Article 2. Purpose: Scope Of Guarantee of California Financial Code >> Division 6. >> Chapter 2.5. >> Article 2.
(a) It shall be the purpose of Fidelity Corporation to
indemnify a member within the State of California against loss,
subject to the limitations set forth in this chapter.
(b) Fidelity Corporation shall not be liable for any consequential
damages sustained by a member, or by any other person, nor for any
punitive damages whatsoever.
(c) The indemnification shall be provided by any of the following:
(1) A fund established by Fidelity Corporation pursuant to Section
(2) A fidelity bond or insurance policy to be approved by the
(3) A combination of paragraphs (1) and (2) subject, however, to
the maximum coverage specified in subdivision (b) of Section 17314.
(d) Fidelity Corporation shall provide a copy to all of its
members and the commissioner of the fidelity bond or insurance policy
as it is acquired or renewed, and Fidelity Corporation shall
promptly provide a copy to any member or successor in interest, upon
(a) Persons licensed pursuant to this division shall
maintain a corporation under the Nonprofit Mutual Benefit Corporation
Law (Part 3 (commencing with Section 7110) of Division 2 of Title 1
of the Corporations Code) operating under the name Escrow Agents'
(b) The State of California, the Department of Business Oversight,
or any officer, agent, or employee of either shall not be liable in
any way for the conduct of Fidelity Corporation, its directors,
officers, agents, employees, or members.
(a) Each person licensed pursuant to this division who is
engaged in the business of receiving escrows specified in subdivision
(c) and whose escrow business location is located within the State
of California shall participate as a member in Fidelity Corporation
in accordance with this chapter and rules established by the Board of
Directors of Fidelity Corporation. Fidelity Corporation shall not
deny membership to any escrow agent holding a valid unrevoked license
under the Escrow Law who is required to be a member under this
(b) Upon filing a new application for licensure as required by
Section 17201, persons required to be a member of Fidelity
Corporation shall file a copy thereof concurrently with Fidelity
Corporation. If an application for licensure submitted to Fidelity
Corporation contains personal or confidential information, Fidelity
Corporation and its board shall maintain this information in
confidence to protect the privacy of the information. The copy of the
application shall include the three-thousand-dollar ($3,000) fee
specified in subdivision (a) of Section 17320 and all required
Fidelity Corporation Certificates set forth in Sections 17331 and
17331.1. Fidelity Corporation shall promptly furnish to the
commissioner a compliance letter confirming that the applicant has
satisfied the requirements to be a member of Fidelity Corporation.
(c) The required membership in Fidelity Corporation shall be
limited to those licensees whose escrow business location is located
within the State of California and who engage, in whole or in part,
in the business of receiving escrows for deposit or delivery in the
following types of transactions:
(1) Real property escrows, including, but not limited to, the
sale, encumbrance, lease, transfer of title, loans or other
obligations to be secured by a lien upon real property, and
exchanges, excluding money or property held or deposited pursuant to
paragraph (3) of subdivision (a) of Section 51003.
(2) Bulk sale escrows, including, but not limited to, the sale or
transfer of title to a business entity and the transfer of liquor
licenses or other types of business licenses or permits.
(3) Fund or joint control escrows, including, but not limited to,
transactions specified in Section 17005.1, and contracts specified in
Section 10263 of the Public Contract Code.
(4) The sale, transfer of title, or refinance escrows for
manufactured homes or mobilehomes.
(5) Reservation deposits required under Article 2 (commencing with
Section 11010) of Chapter 1 of Part 2 of Division 4 of the Business
and Professions Code or by regulation of the Bureau of Real Estate to
be held in an escrow account.
(6) Escrows for sale, transfer, modification, assignment, or
hypothecation of promissory notes secured by deeds of trust.
(d) Coverage required to be provided by Fidelity Corporation under
this chapter shall be provided to members only for loss of trust
obligations with respect to those types of transactions specified in
subdivision (c). If a loss covered by Fidelity Corporation is also
covered by a member's general liability, dishonesty, or indemnity
policy, or other private insurance policy, then the member's private
policy shall first be applied as the primary indemnity to cover the
loss. However, the failure of the member's private primary policy to
indemnify the member's loss within the time specified for Fidelity
Corporation indemnity in subdivision (a) of Section 17314 shall not
limit the indemnity obligations of Fidelity Corporation as defined in
this chapter. Indemnity coverage for those types of transactions not
specified in subdivision (c) shall be provided by escrow agents in
accordance with Section 17203.1.
The commissioner shall review and approve the articles of
incorporation and bylaws of Fidelity Corporation before they are
filed with the Secretary of State.
The fiscal year of Fidelity Corporation shall commence on
July 1 of each year.
(a) Fidelity Corporation shall pay a member for loss of
trust obligations subject to the limitations set forth in this
chapter. Fidelity Corporation shall pay or deny the claim within 90
days of receipt of the proof of loss filed by a member, or a member's
successor in interest. Notwithstanding any other provision of this
article, the protection to members provided by Fidelity Corporation
and by the fidelity bond or insurance policy, if any, shall not
extend to any transaction involving any member at any branch or
business location outside the State of California, but shall extend
only to escrow trust obligations and trust funds located within the
State of California.
(b) Coverage shall be provided to members in accordance with the
LIABILITY PER LOCATION COVERAGE
$0 - $ 1,000,000 $1,000,000
over $1,000,000 - $ $2,000,000
over $3,000,000 - $ $3,000,000
over $5,000,000 - $ $4,000,000
over $7,500,000 - $5,000,000
Pursuant to the schedule, the minimum coverage by Fidelity
Corporation for each licensed location shall be one million dollars
($1,000,000) and the maximum coverage for each licensed location
shall be five million dollars ($5,000,000).
(c) A member shall maintain minimum coverage in accordance with
the schedule in subdivision (b) and shall monitor its escrow
liability monthly. An increase in escrow liability above the monthly
average escrow liability coverage as provided for in subdivision (b)
shall be reported immediately to Fidelity Corporation. Upon receipt
of this report, Fidelity Corporation shall immediately provide for
the increase in coverage, and shall immediately bill and collect
pursuant to Section 17321, an amount necessary to provide for the
(d) Any member with a licensed location or locations with a
monthly average escrow liability greater than ten million dollars
($10,000,000) shall obtain a bond from a corporate surety which is an
admitted insurer in the State of California insuring the balance of
trust funds not covered by Fidelity Corporation, in a ratio of one
dollar of coverage for every three dollars of trust obligations not
covered by Fidelity Corporation. The Fidelity Corporation shall have
the authority to obtain the excess coverage bond. The cost of the
bond shall be shared pro rata by those members included in the
(e) If a member establishes, to the satisfaction of the
commissioner, that a bond is not available or is impracticable under
subdivision (d), then, at the member's election, either:
(1) The member shall place average trust obligations in excess of
ten million dollars ($10,000,000) in a restricted escrow trust
account. Each transfer or release of the funds to be made by specific
resolution of the member's board of directors and the signature of a
neutral third party; or
(2) The licensed location of the member with average trust
balances in excess of ten million dollars ($10,000,000) shall be
subject to examinations to be conducted at a frequency as deemed
appropriate and necessary by the commissioner or Fidelity
Corporation, but not less frequently than once a year.
(f) Any member subject to subdivision (e) shall within 10 business
days after the effective date of this section notify Fidelity
Corporation of its election. A member who subsequently becomes
subject to subdivision (e) shall within a like period of time notify
Fidelity Corporation of its election. Fidelity Corporation shall also
be notified of any change of election in a like period of time.
Fidelity Corporation shall notify the commissioner within 10 business
days of receipt of any notice under this subdivision of the
elections made. All notices under this subdivision shall be in
(a) Notwithstanding any other provision of this article,
Fidelity Corporation shall not be obligated to pay any claim made by
a member unless (1) the claim would, except for the dollar amount
thereof, be a valid claim under the bond as prescribed by Section
17203.1 and (2) the claim is made within the time prescribed by
Section 17205. The protection to members provided by Fidelity
Corporation and by the fidelity bond or insurance policy, if any,
shall therefore be deemed to be coextensive except as to the dollar
amounts as set forth in Section 17314. All defenses available to the
insurer under the fidelity bond or insurance policy, if any, on any
claim shall also be a defense to Fidelity Corporation, as either an
indemnitor or surety, on any claim brought against the corporation.
(b) No person other than a member, or the member's successor in
interest, who shall be the commissioner, a conservator, receiver, or
trustee as designated by a court of competent jurisdiction, is
entitled to assert a claim against Fidelity Corporation for losses
covered under this article.
Claims filed prior to the effective date of this chapter
shall be governed by the provisions in effect when the loss occurred.
(a) A deductible shall apply to each loss suffered by a
member in the amount of five thousand dollars ($5,000), plus 5
percent of the amount by which the loss exceeds five thousand dollars
($5,000). If a member with more than one licensed location suffers a
covered loss at more than one location, the deductible shall apply
to each location separately in proportion to the amount of the loss
suffered at each such licensed location.
(b) Fidelity Corporation shall pay the full amount of any member's
loss to the member or the member's successor in interest. The member
shall be obligated to pay to Fidelity Corporation the amount of the
member's deductible after payment in full of the loss by Fidelity
(c) In the event a license is surrendered, suspended, or revoked
prior to payment in full by the member of all or any portion of the
deductible, the member shall nevertheless be liable to Fidelity
Corporation for the amount of the deductible. If the license of the
member is surrendered, suspended, or revoked prior to payment in full
of the deductible, Fidelity Corporation shall have priority over all
other claimants, except the State of California and any conservator
or receiver of the member's estate, against the assets of the
licensee, including the bond required under Section 17202.
(d) Nothing in this section shall be construed to give any person
or entity not (1) a member of Fidelity Corporation, or (2) a
successor in interest of a member, or (3) the commissioner any right
of action or any right to make a claim directly against Fidelity
Corporation, its officers, directors, agents, or employees. Fidelity
Corporation shall be entitled to recover its reasonable costs and
attorney's fees as an item of costs, as provided for in paragraph
(10) of subdivision (a) and paragraph (5) of subdivision (c) of
Section 1033.5 of the Code of Civil Procedure, in defending any claim
made directly against Fidelity Corporation, not authorized in this
(e) If a member fails to pay the deductible within the time set
forth in the bylaws of Fidelity Corporation, Fidelity Corporation may
bring an action at law or in equity against the member to recover
the amount of the deductible. Fidelity Corporation shall recover its
reasonable costs and attorney's fees as an item of costs, as provided
for in paragraph (10) of subdivision (a) and paragraph (5) of
subdivision (c) of Section 1033.5 of the Code of Civil Procedure,
provided, that the payment of the costs and attorney's fees will not
cause the member to be in violation of Section 17202, 17202.1, or
The commissioner may establish rules which are reasonable
and necessary to carry out the provisions of this chapter.