BILL NUMBER:S5093

TITLE OF BILL:  An act to amend the insurance law, in relation to
disclosing title service charges by a title insurance provider to the
customer upon receipt of an application for a title

PURPOSE:  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 service charges for title services to be rendered.
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 for services it has rendered and the amount
that the title insurance provider is collecting for services that the
provider rendered directly.

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: 2011-12 - S.4920/A.8361

FISCAL IMPLICATIONS: None to the State.

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