Kansas Statutes

Chapter 40: Insurance

Article 11: General Provisions Relative To Casualty, Surety And Fidelity Companies

Statutes:

• 40-1101: Insurance company defined.
• 40-1102: Kinds of insurance and reinsurance authorized; limitations; paid-up capital and surplus requirements.
• 40-1103: Paid-up capital stock and surplus required; deposits of securities; amount.
• 40-1104: Regulation of foreign companies; capital stock and surplus required.
• 40-1105: Revocation of certificate of authority, when.
• 40-1106:
• 40-1107: Maximum amount of one risk or hazard; exceptions.
• 40-1107a: Same; title insurance company; exceptions.
• 40-1108: Reserves of surety company.
• 40-1109:
• 40-1109a, 40-1109b:
• 40-1110: Supplemental coverages or endorsements in connection with liability policies.
• 40-1111:
• 40-1111a:
• 40-1112:
• 40-1112a: Discount for motor vehicle insurance, when; conditions.
• 40-1113:
• 40-1113a:
• 40-1113b:
• 40-1113c:
• 40-1114:
• 40-1114a:
• 40-1115:
• 40-1116, 40-1117:
• 40-1118:
• 40-1119: Same; false or misleading information; penalty.
• 40-1120:
• 40-1121:
• 40-1122:
• 40-1123:
• 40-1124:
• 40-1125:
• 40-1126: Reports by insurers of health care providers of any actions to state board of healing arts.
• 40-1127: Same; content of reports.
• 40-1128: Same; disclosure.
• 40-1129: Same; no liability.
• 40-1130:
• 40-1131:
• 40-1132:
• 40-1133:
• 40-1134: Title insurance companies; policy requirements.
• 40-1135: Title insurance agencies; purpose.
• 40-1136: Same; definitions.
• 40-1137: Same; agents, authorized activities; use of client funds; escrow accounts, audit.
• 40-1138: Same; agent record requirements; inspection.
• 40-1139: Same; financial responsibility requirements.
• 40-1140: Same; rules and regulations; commissioner's orders.
• 40-1141: Same; violations and penalties.

• 40-1101: Insurance company defined. Unless otherwise provided, the words "insurance company" as used in this article shall be construed to include any corporation having a capital stock as provided by section 40-1103, and organized for one or more of the purposes set out in section 40-1102.

        History:   L. 1927, ch. 231, 40-1101; June 1.

• 40-1102: Kinds of insurance and reinsurance authorized; limitations; paid-up capital and surplus requirements. Any insurance company, other than a life insurance company, organized under the laws of this state or authorized to transact business in this state may make all or any one or more of the kinds of insurance and reinsurance comprised in any one of the following numbered classes, subject to and in accordance with its articles of incorporation and the provisions of this code:

        (1) (a)   To insure against bodily injury or death by accident and against disablement resulting from sickness and every insurance appertaining thereto;

        (b)   to insure against the liability of the insured for the death or disability of or damages suffered by an employee or other person, and to insure the obligations accepted by or imposed upon employers under the laws for workmen's compensation;

        (c)   to insure against loss of or damage to, or destruction of property of the insured, or to the property interests of the insured, and to insure against such loss or damage to the property of others or to the property interests of others, for which loss or damage the insured may be liable;

        (d)   to become surety or guarantor for any person, copartnership or corporation in any position or place of trust or as custodian of money or property, public or private; to become a surety or guarantor for the performance by any person, copartnership or corporation of any lawful obligation, undertaking, agreement or contract of any kind, except contracts or policies of insurance;

        (e)   to insure titles to property and against loss by reason of defective titles or encumbrances;

        (f)   to insure the correctness of searches for all instruments, liens, and charges affecting property;

        (g)   to insure against loss by reason of the insufficiency of the security conveyed or pledged under mortgage or deed of trust;

        (h)   to insure the payment of bonds and notes secured by mortgages or deeds of trust, and to buy and sell mortgages or deeds of trust upon real property and interest therein;

        (i)   to insure against loss or damage which may result from the failure of debtors to pay their obligations to the insured, and including the incidental power to acquire and dispose of debts so insured, and to collect any debts owed to such insurer or to any person so insured by the insurer;

        (j)   to insure the payment of money for personal services under contracts of hiring;

        (k)   to make inspections of and issue certificates of inspections upon elevators, boilers, machinery and all mechanical apparatus and appliances appertaining thereto;

        (l)   to insure against loss of use or occupancy caused by or resulting from any of the risks comprised within this class; and

        (m)   to insure against liability, loss or damage from any other risk, hazard, or contingency which may lawfully be the subject of insurance, and specific authority for the transaction of which has not been exclusively delegated to any other class or kind of company. Any company writing insurance against the loss or damage caused by fire, lightning, or by the perils of either marine or inland navigation or transportation, to buildings or other structures erected upon land, to piers, wharves, bulkheads, warehouses, marine vessels, railroad engines, rolling stock or equipment of railroads, or carrying charges for shipments of freight shall have a paid-up capital stock of at least $900,000, a surplus of at least $600,000, and shall have deposited, pursuant to K.S.A. 40-229a, for the protection of its policyholders or creditors, or both with the commissioner of insurance securities authorized by K.S.A. 40-227, and amendments thereto, in an amount equal to not less than the minimum capital stock required by such a company, and shall maintain all reserves required by law for the kinds and classes of business transacted. The deposit required by this section for insurance companies not organized under the laws of this state may be deposited as provided herein or with the insurance department of any other state in the United States.

        History:   L. 1927, ch. 231, 40-1102; L. 1937, ch. 254, § 1; L. 1951, ch. 295, § 1; L. 1965, ch. 300, § 8; L. 1969, ch. 237, § 6; L. 1971, ch. 167, § 2; L. 1972, ch. 184, § 2; L. 1984, ch. 169, § 5; L. 1996, ch. 25, § 12; July 1.

• 40-1103: Paid-up capital stock and surplus required; deposits of securities; amount. No insurance company hereafter organized under the laws of this state shall be authorized to commence the transaction of either of the numbered classes of business specified in K.S.A. 40-1102, and amendments thereto, in this state unless it has a capital stock of at least $450,000 and a surplus of at least $300,000, both fully paid in cash, and shall have deposited with the commissioner of insurance pursuant to K.S.A. 40-229a securities authorized by K.S.A. 40-2a01, et seq., and amendments thereto, in an amount equal to not less than the minimum capital stock required of such company for the protection of its policyholders or creditors, or both. Until May 1, 1989, companies which were authorized to transact business in Kansas after January 1, 1969, but before January 1, 1984, shall be required to have paid-up capital stock, surplus and deposits equal to that which was required by this section prior to the passage of this act. After May 1, 1989, such companies shall comply with the paid-up capital stock, surplus and deposit requirements provided by this act.

        Until May 1, 1989, companies doing business in this state on January 1, 1969, shall be required to have a paid-up capital stock, surplus and deposit equal to that required of such companies prior to the passage of this act. On and after May 1, 1989, companies doing business in this state on January 1, 1969, shall be required to have a paid-up capital stock, surplus and deposit equal to that required of all other companies to whom this section applies immediately prior to the passage of this act.

        No provision of this act shall require any insurance company which was authorized in Kansas prior to January 1, 1984, for only the classes of insurance specified in subsections (e) and (f) of K.S.A. 40-1102, and amendments thereto, to comply with any paid-up capital, surplus and deposit requirements other than the paid-up capital, surplus and deposit requirements which were applicable to the company prior to passage of this act.

        History:   L. 1927, ch. 231, 40-1103; L. 1965, ch. 300, § 4; L. 1969, ch. 237, § 7; L. 1971, ch. 167, § 3; L. 1972, ch. 184, § 3; L. 1984, ch. 169, § 6; L. 1996, ch. 25, § 13; July 1.

• 40-1104: Regulation of foreign companies; capital stock and surplus required. Except as authorized in K.S.A. 40-209, 40-401, and 40-501, and amendments thereto, no insurance company organized under the laws of any other state, district, territory or possession of the United States shall hereafter transact any of the kinds or classes of business specified in K.S.A. 40-1102, and amendments thereto, in this state unless at the time of its application to transact such business in this state it has capital, surplus and deposits equal to that required of a similar domestic insurance company. Until May 1, 1989, companies which were authorized to do business in Kansas after January 1, 1969, but before January 1, 1984, shall be required to have capital stock, surplus and deposits equal to that required by this section prior to the passage of this act. After May 1, 1989, such companies shall comply with the paid-up capital stock, surplus and deposit requirements provided by this act.

        Until May 1, 1989, companies doing business in this state on January 1, 1969, shall be required to have a paid-up capital stock, surplus and deposit equal to that required of such companies prior to the passage of this act. On and after May 1, 1989, companies doing business in this state on January 1, 1969, shall be required to have a paid-up capital stock, surplus and deposit equal to that required of all other companies to whom this section applies immediately prior to the passage of this act.

        On and after May 1, 1994, companies doing business in this state on January 1, 1969, shall comply with the paid-up capital, surplus and deposit requirements provided by this act.

        No insurance company organized under the laws of a country other than the United States shall hereafter be authorized to transact such business in this state unless it shall satisfy the commissioner of insurance of this state that it has on deposit with American trustees, or with the proper officer or officers of a state or states of the United States, or both, satisfactory securities equal in value to the total of the capital and surplus required of a similar domestic insurance company, and that such securities are held in trust for the fulfillment by the company of all its obligations within the United States. Every such foreign insurance company, when applying for admission to transact business in this state, shall file with the commissioner of insurance: (1) A copy of its charter or deed of trust or settlement and bylaws; and (2) a verified detailed statement of all the items, matter and other information in regard to its affairs required by law to be stated in the annual report of a similar domestic insurance company.

        No provision of this act shall require insurance companies doing business in this state on January 1, 1969, which have subsequently become authorized to transact business in accordance with a different article of chapter 40 of the Kansas Statutes Annotated to comply with the paid-up capital, surplus and deposit requirements of this act until May 1, 1994.

        No provision of this act shall require any insurance company which was authorized in Kansas prior to January 1, 1984, for only the classes of insurance specified in subsections (e) and (f) of K.S.A. 40-1102, and amendments thereto, to comply with any paid-up capital, surplus and deposit requirements other than the paid-up capital, surplus and deposit requirements which were applicable to the company prior to passage of this act.

        History:   L. 1927, ch. 231, 40-1104; L. 1965, ch. 300, § 5; L. 1969, ch. 237, § 8; L. 1984, ch. 169, § 7; July 1.

• 40-1105: Revocation of certificate of authority, when. Whenever the surplus of any domestic or foreign insurance company authorized to transact any of the kinds or classes of business specified in section 40-1102 of this article shall be less than the minimum surplus required by law, the commissioner of insurance shall revoke the certificate of authority of such corporation to do business, in accordance with the hearing provisions set forth in K.S.A. 40-222.

        History:   L. 1927, ch. 231, 40-1105; L. 1967, ch. 265, § 1; July 1.

• 40-1106:

        History:   L. 1927, ch. 231, 40-1106; Repealed, L. 1945, ch. 215, § 14; Jan. 1, 1946.

• 40-1107: Maximum amount of one risk or hazard; exceptions. No insurance company organized under the laws of this state and transacting business in this state shall, except as otherwise provided in K.S.A. 40-1107a, expose itself to loss on any one risk or hazard to an amount exceeding ten percent (10%) of its paid-up capital and surplus unless the excess shall be reinsured in some other company duly authorized to transact similar business in this state or as otherwise provided in the insurance code and no insurance company not organized under the laws of this state and transacting business in this state shall, except as otherwise provided in K.S.A. 40-1107a, expose itself to loss on any one risk or hazard to an amount exceeding ten percent (10%) of its paid-up capital and surplus unless the excess shall be reinsured either in some company duly authorized to transact similar business in this state or as provided by the laws of such company's domiciliary state.

        History:   L. 1927, ch. 231, 40-1107; L. 1967, ch. 268, § 1; L. 1971, ch. 168, § 1; July 1.

• 40-1107a: Same; title insurance company; exceptions. No title insurance company organized under the laws of this state, engaged exclusively in the business of insuring titles to real estate, shall expose itself to a loss on any one risk or hazard to an amount exceeding fifty percent (50%) of its paid-up capital and surplus, unless the excess shall be reinsured in some company duly authorized to transact similar business in this state or in any other state, provided such a company not authorized to do business in this state meets or exceeds the financial requirements as to capital and surplus of a title insurance company doing business in this state; and no title insurance company not organized under the laws of this state engaged exclusively in the business of insuring titles to real estate, transacting business in this state, shall expose itself to a loss on any one risk or hazard in this state to an amount exceeding fifty percent (50%) of its paid-up capital and surplus, unless the excess shall be reinsured either in some company duly authorized to transact similar business in this state or in any other state, provided such a company not authorized to do business in this state meets or exceeds the financial requirements as to capital and surplus of a title insurance company doing business in this state. Any title insurance company organized under the laws of this state may take credit as an asset or as a deduction from loss and unearned premium reserves on such ceded risks to the extent reinsured.

        History:   L. 1971, ch. 168, § 2; July 1.

• 40-1108: Reserves of surety company. (a) An insurance company transacting surety business shall at all times keep and maintain adequate reserves on its suretyship obligations as follows: (1) An unearned premium reserve of fifty percentum of the current annual premiums upon all outstanding suretyship obligations: Provided, That the commissioner of insurance, in estimating the condition of such an insurance company, may charge it with a premium reserve equal to the unearned portions of the gross premiums charged, computed on each risk, from the date of the issuance of such suretyship obligation; and (2) a loss reserve at least equal to the aggregate estimated amounts due or to become due on account of all losses and claims of which the corporation has received notice: Provided, That such loss reserve shall also include the estimated liability on any notices received by the insurance company of the occurrence of any event which may result in a loss, and the estimated liability of all losses which have occurred but on which no notice has been received.

        (b)   For the purpose of such reserves, the insurance company shall keep a complete and itemized record showing all losses and claims on which it has received notice, including all notices received by it of the occurrence of any event which may result in a loss; and, in its annual statement to the commissioner of insurance, shall include a schedule showing all losses and claims of which the insurance company has received notice during the year for which the statement is made and which remains unpaid and undisposed of on December thirty-first of such year, and shall also include a schedule showing all the losses and claims of the insurance company unpaid on December thirty-first of the year next preceding, specifying whether the claims have been settled or remain unadjusted, and setting opposite each claim the amount of the reserve carried or maintained against it.

        (c)   Whenever, in the judgment of the commissioner of insurance, the loss reserves on the suretyship obligations of any insurance company, calculated in accordance with the provisions of this section, are inadequate, he may, in his discretion, require such insurance company to maintain additional reserves.

        History:   L. 1927, ch. 231, 40-1108; June 1.

• 40-1109:

        History:   L. 1927, ch. 231, 40-1109; L. 1947, ch. 279, § 1; L. 1949, ch. 281, § 1; Repealed, L. 1951, ch. 296, § 16; June 30.

• 40-1109a, 40-1109b:

        History:   L. 1947, ch. 279, §§ 2, 3; Repealed, L. 1951, ch. 296, § 16; June 30.

• 40-1110: Supplemental coverages or endorsements in connection with liability policies. In connection with insurance against bodily injury liability, burglary, robbery or theft, whether issued by a stock or mutual company, or other insurer, such stock or mutual company or other insurer may also issue endorsements, or supplemental coverages to cover, irrespective of legal liability of the insured, medical, surgical, hospital, funeral or other expenses sustained by the named insured or other person and incurred as a result of bodily injury, sickness or disease caused by accident, or during the commission of a burglary, robbery or theft which is insured against in the basic policy to which such endorsements or supplemental coverages are added. The endorsement or supplemental coverage may also provide benefits to injured persons and death benefits to dependents, beneficiaries or personal representatives of persons who are killed on account of the bodily injury or death of any person including the named insured, irrespective of legal liability of the insured, if such injury or death is caused by accident or, in the case of an automobile liability policy, if such injury or death is caused by accident and sustained by the insured while in or upon, entering into or alighting from or through being struck by an automobile. The standard provisions as set out in article 22 of chapter 40 of the Kansas Statutes Annotated, or amendments thereto shall not be required in such endorsements.

        History:   L. 1941, ch. 260, § 1; L. 1951, ch. 297, § 1; L. 1957, ch. 284, § 1; L. 1968, ch. 273, § 6; July 1.

• 40-1111:

        History:   L. 1945, ch. 215, § 1; L. 1949, ch. 282, § 1; L. 1951, ch. 295, § 2; L. 1965, ch. 303, § 6; L. 1988, ch. 156, § 19; L. 1989, ch. 137, § 1; Repealed, L. 1997, ch. 154, § 18; July 1.

• 40-1111a:

        History:   L. 1989, ch. 137, § 2; Repealed, L. 1997, ch. 154, § 18; July 1.

• 40-1112:

        History:   L. 1945, ch. 215, § 2; L. 1987, ch. 165, § 2; L. 1988, ch. 155, § 4; Repealed, L. 1997, ch. 154, § 18; July 1.

• 40-1112a: Discount for motor vehicle insurance, when; conditions. (a) Any rates, rating schedules, or rating manuals for the liability, personal injury protection, and collision coverages of a motor vehicle insurance policy submitted to or filed with the insurance commissioner shall provide for an appropriate reduction in premium charges as to such coverages for a three-year period after the principal operator of the covered vehicle successfully completes a motor vehicle accident prevention course approved by the national safety council or a governmental agency such as the state board of education. The rates, rating schedule or rating manuals required by subsection (a) shall be submitted to or filed with the commissioner of insurance at the time of the next regular filing with the commissioner after the effective date of this act. Any discount used by an insurer shall be presumed appropriate unless credible data demonstrates otherwise. Only one discount shall be allowed for each qualified person.

        (b)   The premium reduction required by this section shall be effective for an insured for a three-year period after successful completion of the approved course, except that the insurer may require, as a condition of providing and maintaining the discount, that the insured for a three-year period after course completion not be involved in an accident for which the insured is at fault, nor be convicted of more than one moving violation.

        (c)   Upon successfully completing the approved course, each person shall be issued a certificate by the organization offering the course which shall be used to qualify for the premium discount required by this section.

        (d)   This section shall not apply in the event the approved course is specified by an administrative order of the director of vehicles or by a court order as a result of a moving traffic violation.

        (e)   Each participant shall take an approved course every three years to continue to be eligible for the reduction in premiums.

        History:   L. 1992, ch. 310, § 1; L. 1999, ch. 17, § 1; July 1.

• 40-1113:

        History:   L. 1945, ch. 215, § 3; L. 1978, ch. 177, § 2; L. 1979, ch. 141, § 2; L. 1988, ch. 155, § 5; L. 1990, ch. 165, § 2; L. 1991, ch. 132, § 1; Repealed, L. 1997, ch. 154, § 18; July 1.

• 40-1113a:

        History:   L. 1965, ch. 307, § 1; Repealed, L. 1997, ch. 154, § 18; July 1.

• 40-1113b:

        History:   L. 1945, ch. 215, § 3; L. 1978, ch. 177, § 2; L. 1979, ch. 141, § 2; L. 1988, ch. 356, § 90; Repealed, L. 1990, ch. 165, § 3; July 1.

• 40-1113c:

        History:   L. 1990, ch. 154, § 2; L. 1993, ch. 286, § 22; Repealed, L. 1997, ch. 154, § 18; July 1.

• 40-1114:

        History:   L. 1945, ch. 215, § 4; L. 1965, ch. 303, § 7; L. 1988, ch. 356, § 91; Repealed, L. 1997, ch. 154, § 18; July 1.

• 40-1114a:

        History:   L. 1965, ch. 303, § 8; L. 1988, ch. 356, § 92; Repealed, L. 1997, ch. 154, § 18; July 1.

• 40-1115:

        History:   L. 1945, ch. 215, § 5; L. 1965, ch. 303, § 9; Repealed, L. 1997, ch. 154, § 18; July 1.

• 40-1116, 40-1117:

        History:   L. 1945, ch. 215, §§ 6, 7; L. 1965, ch. 303, §§ 10, 11; L. 1988, ch. 356, §§ 93, 94; Repealed, L. 1997, ch. 154, § 18; July 1.

• 40-1118:

        History:   L. 1945, ch. 215, § 8; L. 1965, ch. 303, § 12; L. 1987, ch. 166, § 2; Repealed, L. 1997, ch. 154, § 18; July 1.

• 40-1119: Same; false or misleading information; penalty. No person or organization shall willfully withhold information from, or knowingly give false or misleading information to the commissioner, any statistical agency designated by the commissioner, any rating organization, or any insurer, which will affect the rates or premiums chargeable under this act. If the commissioner finds that any person or organization has violated this section, the commissioner, after notice and the opportunity for hearing, may impose a penalty of not more than $500 for each such violation. If the commissioner determines that such violation was willful, the commissioner may impose a penalty of not more than $2,000 for each such violation. Such penalties may be in addition to any other penalty provided by law.

        History:   L. 1945, ch. 215, § 9; L. 1965, ch. 303, § 13; L. 1997, ch. 24, § 4; July 1.

• 40-1120:

        History:   L. 1945, ch. 215, § 10; L. 1988, ch. 356, § 95; Repealed, L. 1997, ch. 24, § 7; July 1.

• 40-1121:

        History:   L. 1945, ch. 215, § 11; L. 1986, ch. 318, § 30; Repealed, L. 1997, ch. 154, § 18; July 1.

• 40-1122:

        History:   L. 1945, ch. 215, § 12; L. 1965, ch. 303, § 14; Repealed, L. 1997, ch. 154, § 18; July 1.

• 40-1123:

        History:   L. 1945, ch. 215, § 13; Repealed, L. 1997, ch. 154, § 18; July 1.

• 40-1124:

        History:   L. 1965, ch. 303, § 15; Repealed, L. 1997, ch. 154, § 18; July 1.

• 40-1125:

        History:   L. 1965, ch. 303, § 16; L. 1988, ch. 356, § 96; Repealed, L. 1997, ch. 154, § 18; July 1.

• 40-1126: Reports by insurers of health care providers of any actions to state board of healing arts. (a) Every insurer providing professional liability insurance to a health care provider who is licensed, registered or certified by the state board of healing arts and covered by the health care stabilization fund established pursuant to subsection (a) of K.S.A. 40-3403, and amendments thereto, or entity with whom the insurer contracts for purposes of complying with this act shall report to the state board of healing arts any action for damages for personal injuries or loss claimed to have been caused by error, omission, or negligence in performance of such insured's professional services or based on a claimed performance of professional services without consent, upon final disposition of the action.

        (b)   Reports of the information required by subsection (a) shall be filed with the state board of healing arts no later than 30 days following the final disposition of the action.

        (c)   Failure to report the information required by subsection (a) shall constitute a violation of K.S.A. 40-1120, and amendments thereto, and shall be subject to penalties applicable thereto.

        History:   L. 1975, ch. 241, § 1; L. 1976, ch. 216, § 1; L. 1977, ch. 160, § 1; L. 1978, ch. 178, § 1; L. 1986, ch. 231, § 3; L. 1988, ch. 246, § 11; L. 1994, ch. 196, § 1; L. 1996, ch. 65, § 1; July 1.

• 40-1127: Same; content of reports. The reports required by subsection (a) of K.S.A. 40-1126 shall contain: (a) The insured's name and license number issued by the state board of healing arts; (b) date of occurrence which created the action; and (c) the name of the plaintiff and the injured party, if different.

        History:   L. 1975, ch. 241, § 2; L. 1976, ch. 216, § 2; L. 1977, ch. 160, § 2; L. 1978, ch. 178, § 2; L. 1994, ch. 196, § 2; July 1.

• 40-1128: Same; disclosure. The state board of healing arts shall make such reports available to the public in a manner which will not reveal the names of any person or facility involved.

        History:   L. 1975, ch. 241, § 3; L. 1976, ch. 216, § 3; L. 1996, ch. 65, § 2; July 1.

• 40-1129: Same; no liability. There shall be no liability on the part of and no cause of action of any nature shall arise against any insurer reporting hereunder or its agents or employees, or the state board of healing arts or the board's employees, for any action taken by them pursuant to this act.

        History:   L. 1975, ch. 241, § 4; L. 1996, ch. 65, § 3; July 1.

• 40-1130:

        History:   L. 1977, ch. 156 § 1; L. 1978, ch. 179, § 1; Repealed, L. 1987, ch. 167, § 1; July 1.

• 40-1131:

        History:   L. 1978, ch. 179, § 2; Repealed, L. 1987, ch. 167, § 1; July 1.

• 40-1132:

        History:   L. 1983, ch. 152, § 1; L. 1992, ch. 28, § 1; Repealed, L. 1995, ch. 136, § 1; Apr. 20.

• 40-1133:

        History:   L. 1983, ch. 152, § 2; Repealed, L. 1995, ch. 136, § 1; Apr. 20.

• 40-1134: Title insurance companies; policy requirements. (a) Any title insurance company insuring titles to real estate located within Kansas shall specify in any policy issued when the governing body of a municipal or quasi-municipal corporation in which the property is located has filed with the register of deeds of the county or counties in which such municipal or quasi-municipal corporation is located, a certified copy of any ordinance or resolution creating or establishing any public improvement or special benefit district or any other district having the power to impose special assessments upon taxable tangible real property in the district as required by K.S.A. 12-153 and amendments thereto, provided the municipal or quasi-municipal corporation creating such public improvement or special benefit district has particularly described: (1) The external boundaries of the district by metes and bounds; (2) all platted areas block or parcel in any addition, or subdivision; and (3) in all unplatted areas, every tract or parcel not otherwise specifically identified, which is or will be affected by such public improvement or special benefit district.

        (b)   No title insurance company shall exempt itself from the provisions of subsection (a) by means of a general exclusion in the title insurance policy.

        History:   L. 1983, ch. 151, § 1; July 1.

• 40-1135: Title insurance agencies; purpose. The purpose of K.S.A. 40-1135 through 40-1141 is to provide the state of Kansas with a comprehensive body of law for the effective regulation and supervision of title insurance agencies engaged in settlement and closing of the sale of an interest in real estate.

        History:   L. 1999, ch. 95, § 8; July 1.

• 40-1136: Same; definitions. As used in this act, unless the context otherwise requires:

        (a)   "Commissioner" means the commissioner of insurance of the state of Kansas.

        (b)   "Escrow" means written instruments, money or other items deposited by one party with a depository, escrow agent or escrow for delivery to another party upon the performance of a specified condition or the happening of a certain event.

        (c)   "Person" means a natural person, partnership, association, cooperative, corporation, trust or other legal entity.

        (d)   "Qualified financial institution" means an institution that is:

        (1)   Organized or (in the case of a U.S. branch or agency office of a foreign banking organization) licensed under the laws of the United States or any state and has been granted authority to operate with fiduciary powers;

        (2)   regulated, supervised and examined by federal or state authorities having regulatory authority over banks and trust companies;

        (3)   insured by the appropriate federal entity; and

        (4)   qualified under any additional rules established by the commissioner.

        (e)   "Title insurance agent" or "agent" means an authorized person, other than a bona fide employee of the title insurer who, on behalf of the title insurer, performs the following acts, in conjunction with the issuance of a title insurance report or policy:

        (1)   Determines insurability and issues title insurance reports or policies, or both, based upon the performance or review of a search, or an abstract of title;

        (2)   collects or disburses premiums, escrow or security deposits or other funds;

        (3)   handles escrow, settlements or closings;

        (4)   solicits or negotiates title insurance business; or

        (5)   records closing documents.

        (f)   "Title insurer" or "insurer" means a company organized under laws of this state for the purpose of transacting the business of title insurance and any foreign or non-U.S. title insurer licensed in this state to transact the business of title insurance.

        (g)   "Title insurance policy" or "policy" means a contract insuring or indemnifying owners of, or other persons lawfully interested in, real or personal property or any interest in real property, against loss or damage arising from any or all of the following conditions existing on or before the policy date and not excepted or excluded:

        (1)   Defects in or liens or encumbrances on the insured title;

        (2)   unmarketability of the insured title;

        (3)   invalidity, lack of priority, or unenforceability of liens or encumbrances on the stated property;

        (4)   lack of legal right of access to the land; or

        (5)   unenforceability of rights in title to the land.

        History:   L. 1999, ch. 95, § 9; July 1.

• 40-1137: Same; agents, authorized activities; use of client funds; escrow accounts, audit. A title insurance agent may operate as an escrow, settlement or closing agent, provided that:

        (a)   All funds deposited with the title insurance agent in connection with an escrow, settlement or closing shall be submitted for collection to, invested in or deposited in a separate fiduciary trust account or accounts in a qualified financial institution no later than the close of the next business day, in accordance with the following requirements:

        (1)   The funds shall be the property of the person or persons entitled to them under the provisions of the escrow, settlement or closing agreement and shall be segregated for each depository by escrow, settlement or closing in the records of the title insurance agent in a manner that permits the funds to be identified on an individual basis;

        (2)   the funds shall be applied only in accordance with the terms of the individual instructions or agreements under which the funds were accepted; and

        (3)   an agent shall not retain any interest on any money held in an interest-bearing account without the written consent of all parties to the transaction.

        (b)   Funds held in an escrow account shall be disbursed only:

        (1)   Pursuant to written authorization of buyer and seller;

        (2)   pursuant to a court order; or

        (3)   when a transaction is closed according to the agreement of the parties.

        (c)   A title insurance agent shall not commingle the agent's personal funds or other moneys with escrow funds. In addition, the agent shall not use escrow funds to pay or to indemnify against the debts of the agent or of any other party. The escrow funds shall be used only to fulfill the terms of the individual escrow and none of the funds shall be utilized until the necessary conditions of the escrow have been met. All funds deposited for real estate closings, including closings involving refinances of existing mortgage loans, which exceed $2,500 shall be in one of the following forms:

        (1)   Lawful money of the United States;

        (2)   wire transfers such that the funds are unconditionally received by the title insurance agent or the agent's depository;

        (3)   cashier's checks, certified checks, teller's checks or bank money orders issued by a federally insured financial institution and unconditionally held by the title insurance agent;

        (4)   funds received from governmental entities, federally chartered instrumentalities of the United States or drawn on an escrow account of a real estate broker licensed in the state or drawn on an escrow account of a title insurer or title insurance agent licensed to do business in the state; or

        (5)   other negotiable instruments which have been on deposit in the escrow account at least 10 days.

        (d)   Each title insurance agent shall have an audit made of its escrow, settlement and closing deposit accounts, conducted by a certified public accountant or by a title insurer for which the title insurance agent has a licensing agreement, according to the following schedule. Audits shall be considered current if dated within the 12 months prior to submission of the audit as required herein. The title insurance agent shall provide a copy of the audit report to the commissioner and to each title insurance company which it represents within 160 days after the close of the calendar year for which an audit is required. Title insurance agents who are attorneys and who issue title insurance policies as part of their legal representation of clients are exempt from the requirements of this subsection. However, the title insurer, at its expense, may conduct or cause to be conducted an annual audit of the escrow, settlement and closing accounts of the attorney. Attorneys who are exclusively in the business of title insurance are not exempt from the requirements of this subsection. Audits shall be required as follows:

        (1)   Annual audit required in counties having a population of 40,001 and over;

        (2)   biennial audit required in counties having a population of 20,001 - 40,000; and

        (3)   triennial audit required in counties having a population of 20,000 or under.

        (e)   The commissioner may promulgate rules and regulations setting forth the standards of the audit and the form of audit report required.

        (f)   If the title insurance agent is appointed by two or more title insurers and maintains fiduciary trust accounts in connection with providing escrow and closing settlement services, the title insurance agent shall allow each title insurer reasonable access to the accounts and any or all of the supporting account information in order to ascertain the safety and security of the funds held by the title insurance agent.

        (g)   Nothing in this section is intended to amend, alter or supersede other laws of this state or the United States, regarding an escrow holder's duties and obligations.

        History:   L. 1999, ch. 95, § 10; L. 2000, ch. 26, § 1; July 1.

• 40-1138: Same; agent record requirements; inspection. (a) The title insurance agent shall maintain sufficient records of its escrow operations and escrow trust accounts so that the commissioner may adequately ensure that the title insurance agent is in compliance with all provisions of K.S.A. 40-1135 through 40-1141 and amendments thereto. The commissioner may prescribe the specific record entries and documents to be kept and the length of time for which the records must be maintained.

        (b)   The title insurance agent shall make available for inspection by the commissioner, or the commissioner's representatives, all records relating to the title insurance agent's escrow, settlement and closing business, and any other fiduciary trust accounts required to be kept by the title insurance agent. Such availability for inspection shall include any records to which subsection (f) of K.S.A. 40-1137 and amendments thereto applies.

        History:   L. 1999, ch. 95, § 11; July 1.

• 40-1139: Same; financial responsibility requirements. (a) The title insurance agent who handles escrow, settlement or closing accounts shall file with the commissioner a surety bond or irrevocable letter of credit in a form acceptable to the commissioner, issued by an insurance company or financial institution authorized to conduct business in this state, securing the applicant's or the title insurance agent's faithful performance of all duties and obligations set out in K.S.A. 40-1135 through 40-1141 and amendments thereto.

        (b)   The terms of the bond or irrevocable letter of credit shall be:

        (1)   The surety bond shall provide that such bond may not be terminated without 30 days prior written notice to the commissioner.

        (2)   An irrevocable letter of credit shall be issued by a bank which is insured by the federal deposit insurance corporation or its successor if such letter of credit is initially issued for a term of at least one year and by its terms is automatically renewed at each expiration date for at least an additional one-year term unless at least 30 days prior written notice of intention not to renew is given to the commissioner of insurance.

        (c)   The amount of the surety bond or irrevocable letter of credit for those agents servicing real estate transactions on property located in counties having a certain population shall be required as follows:

        (1)   $100,000 surety bond or irrevocable letter of credit in counties having a population of 40,001 and over;

        (2)   $50,000 surety bond or irrevocable letter of credit in counties having a population of 20,001 to 40,000; and

        (3)   $25,000 surety bond or irrevocable letter of credit in counties having a population of 20,000 or under.

        (d)   The surety bond or irrevocable letter of credit shall be for the benefit of any person suffering a loss if the title insurance agent converts or misappropriates money received or held in escrow, deposit or trust accounts while acting as a title insurance agent providing any escrow or settlement services.

        History:   L. 1999, ch. 95, § 12; July 1.

• 40-1140: Same; rules and regulations; commissioner's orders. The commissioner may issue rules, regulations and orders necessary to carry out the provisions of K.S.A. 40-1135 through 40-1141 and amendments thereto.

        History:   L. 1999, ch. 95, § 13; July 1.

• 40-1141: Same; violations and penalties. If the commissioner determines that the title insurance agent or any other person has violated this act, or any rules and regulation or order promulgated thereunder, after notice and opportunity to be heard, the commissioner may order that such person be subject to the penalties provided in K.S.A. 40-2406 et seq. and amendments thereto.

        History:   L. 1999, ch. 95, § 14; July 1.