OGC Opinion No. 05-03-05

The Office of General Counsel issued the following opinion on March 10, 2005, representing the position of the New York State Insurance Department.

Re: Permissibility of Joint Venture Title Agent Proposal

Question Presented:

Does N.Y. Ins. Law § 6409 (McKinney 2000) prohibit the formation of a Joint Venture/Title Agent under the circumstances outlined below?


No, provided there is strict compliance with the requirements laid out herein.


The inquirer proposes to form a Joint Venture/Title Agency ("JVTA"), which will have four co-owners who will share a 25% ownership interest in the JVTA. The owners will include a law firm, a mortgage broker, an employee of a mortgage bank and another individual. The JVTA will get its title business from the mortgage bank employee and another co-owner. Title business referred by the mortgage bank employee, as co-owner, will arise from mortgage transactions in which its employer, the mortgage bank, is the lender. The mortgage bank in question will not have any ownership interest in the JVTA.

The inquirer also indicates that initially all title business will be from the co-owner sources but eventually the JVTA intends to obtain title business from other non-owner sources. The inquirer also states that no applicant for insurance/borrower will be required to utilize the services of the JVTA as a condition to securing a mortgage commitment.


N.Y. Ins. Law § 6409(d) (McKinney 2000) 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.

While there is nothing in the Insurance Law that expressly prohibits the formation of JVTAs, Section 6409(d) prohibits, among other things, rebates or payments, directly or indirectly, of any remuneration to the persons listed therein if such remuneration constitutes, among other things, an inducement for, or as compensation for any title insurance business. In these contexts, the issue of prohibited remuneration arises where, for example, an owner or co-owner, being the only source of business for the JVTA, receives compensation that is based on the amount of title business he/she brings in.

However, the Department has opined that the statute is not violated under the following circumstances: where there is, in fact, multiple sources of business for the JVTA, other than the referrals made by the co-owners. In addition, the co-owners of the JVTA receive compensation, in terms of profits, that is based upon their ownership interest, not on the amount of business they refer to the JVTA. Further, there is no agreement regarding the amount of business each co-owner will generate, and applicants for insurance, among others, are not required to utilize the services of the JVTA in order to, among other things, secure a mortgage commitment. See also Office of General Counsel Opinions dated November 14, 2002, May 2, 2002, March 21, 2002, January 14, 2002 and May 11, 2001, which address similar proposals.

This opinion is limited to an interpretation of the Insurance Law.

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