- January 29, 2019
- All New York State Office Counsel, Managers and Agents
- NY Insurance Regulation 208/Article 78 Petition Appeal
Last week the New York State Land Title Association was notified of the Appellate Division decision on the appeal of the Supreme Court order annulling Regulation 208. The Appellate Division has reversed the Supreme Court’s decision on several of the regulation’s provisions. This Bulletin is being sent to advise our Policy issuing Agents of the reversal and the re-instatement of portions of Regulation 208.
Regulation 208, Sections 228.2, and others, have been re-instated, making certain marketing activities prohibited under 6409D of New York’s Insurance law.
A word on 6409D of the insurance Law: 6409D of the insurance law prohibits the payment, offering or making of any rebate or giving a thing of value, either directly or indirectly, to the applicant or the applicant’s representative, as compensation for any title insurance business. Section 228.2 provides that no title insurance corporation, title insurance agent, or any other person acting for or on behalf of such title insurance corporation or title insurance agent, including any employee or independent contractor thereof, shall offer or make any rebate, directly or indirectly, or pay or give any consideration or valuable thing, to any applicant, or to any person, firm or corporation acting as an agent, representative, attorney or employee of the actual or prospective owner, lessee, mortgagee of the real property or any interest therein, as an inducement for, or as compensation for, any title insurance business, including future title insurance business, and maintaining existing title insurance business, regardless of whether provided as a quid pro quo for specific business. The penalties associated with the violation of these sections of the law, run to both the giver and the receiver.
6409D provides: Any person or entity who violates this section shall be subject to a penalty of (1) five thousand dollars; or (2) up to ten times the amount of any compensation or rebate received or paid in the case of a title insurance corporation or title insurance agent; or (3) up to five times the amount of any compensation or rebate received or paid; or (4) in the case of an applicant for title insurance that covers real property used predominantly for residential purposes, and which consists of not more than four dwelling units, other than hotels and motels, an amount not to exceed the compensation or rebate received or paid, when such applicant knew that it was a violation to receive such rebate, or other consideration or valuable thing; provided, however, if such applicant did not know that it was a violation to receive such rebate, or other consideration or valuable thing, he or she shall not be assessed a penalty under this subdivision.
Effective immediately: Section 228.2 prohibits any payment, expense, compensation or benefit to any applicant or applicant’s representative, either current or future, associated with the following activities:
(1) Meals and beverages;
(2) Entertainment, including tickets to sporting events, concerts, shows or artistic performances;
(3) Gifts, including cash, gift cards, gift certificates, or other items with a specific monetary face value;
(4) Outings, including vacations, holidays, golf, ski, fishing, and other sport outings, gambling trips, shopping trips, or trips to recreational areas, including country clubs;
(5) Parties, including cocktail parties and holiday parties, open houses;
(6) Providing assistance with business expenses of another person, including but not limited to rent, employee salaries, advertising, furniture, office supplies, telephones, telecommunications, computers and other electronic devices and business equipment, or automobiles, or leasing, renting, operating, or maintaining any of such items, for use by other than a title insurance corporation or title insurance agent;
(7) Use of premises, unless a fair rental fee is charged that is equal to the market value in the premises’ geographical area;
(8) Paying the fees or charges of any professional representing an insured as part of a real estate transaction, such as an attorney, engineer, appraiser, or surveyor, or paying rent or all or any part of the salary or other compensation of any employee or officer of any current or prospective customer; and
(9) Providing or offering to provide non-title services, without a charge that is commensurate with the actual cost thereof.
Thus, both the activity and expenses associated with the activity are prohibited when the Agent is paying for either a current or prospective applicant or the applicant’s representative.
The regulation does however provide guidance on permitted activity and permitted expenses. The following expenses and activities are permissible provided that they are without regard to insured status or conditioned directly or indirectly on the referral of title business, and offered with no expectation of, or obligation imposed upon, to refer, apply for or purchase insurance. In addition, any expenses incurred pursuant to this subsection must be reasonable and customary, and not lavish or excessive:
(1) Advertising or marketing in any publication, or media, at market rates;
(2) Advertising and promotional items of a de Minimis value that include a permanently affixed logo of a title insurance agent or title insurance corporation;
(3) Promotional or marketing events including complementary food and beverages that are open to and attended by the general public;
(4) Continuing legal education events including complementary food and beverages that are open to any member of the legal profession;
(5) Complementary attendance offered by a title insurance corporation, title insurance agent as a host of a marketing or promotional event, including food and beverages available to all attendees so long as (a) title insurance business is discussed for a substantial portion of the event including a presentation of title insurance products and services, (b) such events are not offered on a regular basis or as a regular occurrence, and (c) at least twenty-five diverse individuals from different organizations not affiliated with the host attend or were, in good faith, invited to attend in person;
(6) Charitable contributions made by negotiable instrument made payable only to the charitable organization in the name of the title insurance corporation or title insurance agent; and political contributions.
It is important to understand that the items listed above are intended as examples of permitted and prohibited practices under Insurance Law 6409(d) and should not be considered as exclusive or exhaustive.
In addition to the reinstatement of Section 228.2, the decision also affects other sections of Regulation 208. The question concerning title closers: Both in-house and independent closers are able to receive a “pick up” fee as well as other compensation directly from the applicant or their representative for services rendered. (Section 228.5 (d) 1 and (d) 2 continue to be annulled).
The ancillary fees question: The fee caps on bankruptcy, Patriots and municipal searches not conducted and billed by a municipality continue to be annulled. (Section 228.5 (a) (1), (2) and (3) of Regulation 208). For residential property, (1-4 family residential) the following caps on ancillary fees caps are in effect: Survey inspections: $75 plus the out of pocket charges by the survey inspector. Escrow services: $50 per escrow, Recordings: $25 per document plus the charges by the municipal recording office, Overnight mail: Actual out of pocket charge by carrier.
Additional Sections that have been severed from the continued annulment (currently in effect) are:
228.0 Scope and purpose
228.3 Expense reporting and rate filing
228.4 Allocation of expenses
228.6 Filings to demonstrate continued compliance with Insurance Law article 23
We will continue to update you as we work through the remaining issues associated with the Appellate Decision.
THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.