Requires disclosure of title service charges by a title insurance provider to the customer upon receipt of an application for a title insurance policy

Summary of provisions

Section one amends the insurance law by adding a new section 6412. Section 6412(a) provides definitions of "title insurance provider," "title service" and "title services," "service charge" and "service charges," "applicant" and "customer." "Title insurance provider" is defined as a title insurance corporation, as defined in subsection (a) of section 6401 of this article, and any agent, approved attorney or examining counsel which is issuing a title insurance policy on behalf of a title insurance corporation. "Title service" and "title services" mean every service actually rendered by a title insurance provider, or obtained by a title insurance provider through a third party, the charge for which is imposed on a customer and is not regulated by the department of insurance.

"Service charge" and "service charges" are defined as an amount charged to a customer by a title insurance provider for providing one or more title services; provided, however, that "service charge" or "service charges" shall not include a charge for the search and examination of title. "Applicant" means the person or entity ordering title insurance or title services or their duly authorized representative. "Customer" is defined as any person or entity paying a title insurance provider title insurance premiums and service charges for title services for real property improved by a one-to-four family residence or their duly authorized representative.

Section 6412(b) provides that upon receipt of an application for a title insurance policy for real property improved by a one-to-four family residence, a title insurance provider shall issue to the applicant a list of its service charges for title services.

Section 6412(c) requires that the statement of charges issued by a title insurance provider to a customer shall clearly and separately itemize (1) each service charge being paid by the title insurance provider to a third party with respect to title services rendered by such third party; (2) each service charge of the title insurance provider with respect to title services rendered by such title

insurance provider; and (3) any other service charges incurred by the title insurance provider in connection with any other title service.

Section 6412(d) provides that in the event of a willful failure to comply with this section, a customer shall be entitled to recover from the title insurance provider rendering title services the lesser of (1) $1,500.00 or (2) three times the amount of each service charge billed to the customer in violation of this section.

Section 6412(e) provides that nothing contained in this section shall be construed as permitting any practice or conduct otherwise prohibited by law.

Justification

In typical residential real estate transactions, title insurance companies and their agents are requested by sellers, purchasers or lenders to arrange for various services. Frequently, these services are obtained from third parties and the customer is billed by the title insurance provider for ordering, coordinating and delivering these services. For example, a title insurance provider may be requested to arrange for the following services: for a survey to be done by ,a licensed surveyor; to have an existing survey updated; to have the property shown on an existing survey inspected; to obtain copies of certificates of occupancy and other similar municipal records; and/or to submit for recording documents executed in connection with the closing, accompanied by all required forms.

Other times, these services are provided directly by the title insurance provider itself. However, unlike title insurance premiums, charges for title services are not regulated by the state insurance department. Accordingly, whether these services are provided by the title insurance provider directly or indirectly, there is no legal requirement that charges for title services to be rendered be clearly and separately disclosed to an applicant in a manner and at a time which would allow the applicant to select a title insurance provider with knowledge of the service charges that will be assessed. As a consequence, customers of title insurance providers are often unaware of service charges to be imposed until the time of closing (or cancellation of an order for title insurance). Even at the time of closing (or cancellation of an order, if applicable), there is no requirement that the invoice provided by the title insurance provider clearly differentiate between the amount payable to a third party for services rendered and the amount payable to a title insurance provider for services it provided directly.

This lack of clear, up front disclosure impedes the ability of applicants to select, in a timely manner, the best title insurance provider at the cheapest possible price. The failure of title insurance providers to differentiate between the amount payable to a third party for services it has rendered and the amount payable to a title insurance provider for services it provided directly means that invoices lack transparency and make customers vulnerable to excessive charges.

In light of the foregoing, this legislation requires that a title insurance provider, upon receipt of an application for a title

insurance policy for real property improved by a one-to-four family residence, provide to the applicant a list of its service charges for title services, whether those services are provided directly or indirectly. This bill also requires that an invoice issued to a customer by a title insurance provider clearly differentiate, on separate lines, between the amount that the title insurance provider is collecting to remit to a third party and the amount that it is collecting for the services that it has rendered.

Finally, in some parts of the State, under insurance department regulations, a charge for the search and examination of title is not part of the title insurance premium and thus may be billed to a customer as a separate service charge. However, since this charge may not be known until the search and examination of title is completed, such a charge is not required to be included in the list of service charges required to be disclosed to an applicant under this legislation.

Legislative history

None.

Fiscal implications

None to the State.

Effective date

This act will take effect on the ninetieth day after it shall have become a law.