OGC Opinion No. 05-05-06

The Office of General Counsel issued the following opinion on May 4, 2005, representing the position of the New York State Insurance Department.

Re: Permissibility of Proposed Business Arrangement/Joint Venture/Title Agent

Question Presented:

Does N.Y. Ins. Law § 6409 (McKinney 2000) prohibit the formation of a joint venture, under the circumstances outlined below?


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


The inquirer states that the proposed arrangement involves a joint venture in which a client, a title insurance agency, is a co-owner. The other co-owner is a real estate development company ("Developer"). The inquirer states that the purpose of the joint venture is to issue title insurance. The inquirer states that there will, in fact, be multiple sources of business, other than title insurance business referred by the Developer. The joint venture intends to provide title insurance to those purchasers who choose to purchase title insurance from the joint venture. The inquirer also points out that no purchaser will be directed or required to obtain title insurance from the joint venture and may purchase insurance, without penalty, from any title insurance company or title agency.

In addition, the inquirer states that each co-owner will receive compensation, in terms of profits, that is based upon their ownership interest, not on the amount of business they refer to the joint venture.


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 joint ventures such as the one proposed, Section 6409(d) prohibits, among other things, the giving of a rebate, consideration or other thing of value, directly or indirectly, to the persons listed therein if such remuneration constitutes, among other things, an inducement for, or as compensation for any title insurance business. 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 joint venture, other than the referrals made by the co-owners. In the situation proposed, there must be other sources of business other than the Developer's. The co-owners of the joint venture may receive compensation, in terms of profits, that is based upon their ownership interest, not on the amount of business they refer to the joint venture. Further, there may be no agreement regarding the amount of business each co-owner will generate.

In addition, applicants for insurance may not be given, among other things, any consideration or valuable thing for using the joint venture to obtain title insurance. Also, they may not be penalized for using the services of another title agent or title insurance company and may not be required to utilize the services of the joint venture in order to, among other things, secure a mortgage commitment. Please visit our website at http://www.ins.state.ny.us, for other opinions that 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.