New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

Gregory V. Serio
Superintendent

The Office of General Counsel issued the following opinion on September 5, 2003, representing the position of the New York State Insurance Department.

Re: Attorney’s Ownership of Title Insurance Company and the Giving of Rebates and Price Incentives

QUESTIONS PRESENTED:

1. May a title insurance company give discounts, in the form of rebates or other price incentives, to an applicant for title insurance?

2. Does the Insurance Law prohibit an attorney from owning a title insurance company?

3. May an attorney, as owner of a title insurance company, represent a bank at closing while charging borrowers legal fees for title search, title insurance and closing?

CONCLUSIONS:

1. N.Y. Ins. Law § 6409(d) (McKinney 2000) prohibits a title insurance corporation or anyone acting for or on its behalf from paying or giving, among other things, any rebate or other consideration as an inducement or compensation for any title insurance business. Thus, a title insurance company may not give discounts, in the form of rebates or other price incentives, to an applicant for title insurance.

2. There is nothing in the Insurance Law that prohibits an attorney from owning a title insurance company.

3. There is nothing in the Insurance Law that prohibits such arrangement.

FACTS:

The inquiry was general in nature. No specific facts were given.

ANALYSIS:

The inquirer asks whether a title insurance company may give discounts, in the form of a rebate or other price incentives, to applicants for insurance. N.Y. Ins. Law § 6409(d) (McKinney 2000), the rebating section that applies to title insurance, provides:

(d) No title insurance corporation or any other person acting for or on behalf of it, shall make any rebate of any portion of the fee, premium or charge made, or pay or give to any applicant for insurance, or to any person, firm, or corporation acting as agent, representative, attorney, or employee of the owner, lessee, mortgagee or the prospective owner, lessee, or mortgagee of the real property or any interest therein, either directly or indirectly, any commission, any part of its fees or charges, or any other consideration or valuable thing, as an inducement for, or as compensation for, any title insurance business. Any person or entity who accepts or receives such a commission or rebate shall be subject to a penalty equal to the greater of one thousand dollars or five times the amount thereof.

Section 6409(d) prohibits a title insurance corporation (which must be licensed by this Department) or anyone acting for or on its behalf from giving, among other things, any rebate or other consideration as an inducement or compensation for any title insurance business. Thus, a title insurance company may not give discounts, in the form of rebates or other price incentives, to an applicant for insurance.

Further, the inquirer questions whether the Insurance Law prohibits an attorney from owning a title insurance company. There is nothing in the Insurance Law that prohibits an attorney from owning a title insurance company.

The inquirer also asks whether there is a conflict of interest where an attorney (as owner of a title insurance company) represents the bank at closing and charges borrowers legal fees for the closing, for title search and title insurance. There is nothing in the Insurance Law that prohibits this specific arrangement, thus, no opinion is offered herein on such issues. However, improper activity by an agent or other representative of a title insurance company may subject the title insurance company to disciplinary action.

This opinion is limited to an interpretation of the Insurance Law. Please consult the Lawyer’s Code of Professional Responsibility and Disciplinary Rules as transactions described in this inquiry involve the provision of legal services as well as the services of a title insurance closer and owner of a title insurance company. Also, please consult the Real Estate Settlement Procedures Act (RESPA) and the Banking Law for further guidance on these issues.

For further information you may contact Associate Attorney D. Monica Marsh at the New York City Office.