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Public Regulation Commission 2007 Activities

Presentation to Courts, Corrections and Justice Interim Committee on Title Insurance Reform November 20, 2007. Public Regulation Commission 2007 Activities. Title Insurance Task Force Convened PRC, AG, Consumer Advocates (local and national), Title Agents/Underwriters, Real Estate

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Public Regulation Commission 2007 Activities

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  1. Presentation to Courts, Corrections and Justice Interim Committee onTitle Insurance ReformNovember 20, 2007

  2. Public Regulation Commission 2007 Activities • Title Insurance Task Force Convened • PRC, AG, Consumer Advocates (local and national), Title Agents/Underwriters, Real Estate • Three meetings to-date • UNM Comparative Cost Study • Unpaid Claims Data Call • Appeal of 2006 Title Rates to PRC

  3. Title Insurance Statutory Immunity from Negligence “The duty to search and examine imposed by this section is solely for the purpose of enhancing the financial stability of title insurers for the benefit of insureds under title insurance policies. The New Mexico Title Insurance Law is not intended and should not be construed to create any duty to search and examine that runs to the benefit of, or to create any right or cause of action in favor of, any person other than a title insurer.” NMSA § 59A-30-11

  4. Consumer/Plaintiff Bar Concerns • Property buyers unable to recover damages resulting from title agent/insurer’s failure to convey information or perform a reasonable search, when the resulting defect is not covered under the policy • New Mexico’s statute is unusual • Many states allow negligence suits

  5. Industry Concerns • Buyers shouldn’t be able to recover twice (contract + negligence) for same damages • Title companies shouldn’t be at risk for value appreciation after the policy sale date • Agents shouldn’t bear the litigation risk

  6. Proposed Change: The duty to search and examine imposed by this section is solely for the purpose of enhancing the financial stability of title insurers for the benefit of insureds under title insurance policies. The New Mexico Title Insurance Law [this article] is not intended and should not be construed to create any duty to search and examine that runs to the benefit of, or to create any right or cause of action in favor of, any person other than a title insurer.   Provided that a title insurance policy has been issued, only the title insurer, and not its agent or the agent’s employees, shall be liable for damages caused to the insured or any other partyby a negligent search and examination required by this section. An award of damages caused by a negligent search and examination shall not exceed the fair market value of the property as of the date of the search and examination. The agent and the agent’s employees shall not be named as parties in any action for negligent search and examination.

  7. Rate Reform • Title Insurance is “totally regulated” in New Mexico to provide for protection of consumers and financial stability of title industry. NMSA § 59A-30-2 • Superintendent of Insurance • sets rates: all companies must charge same price for same policy and coverage. Rates are based on analysis of historic costs • promulgates “forms,”e.g., policy coverage and language, exceptions, binders, etc.

  8. New Mexico Title Insurance Rate Trend Bernalillo Cty title cost: + 26% over 10 years; home price +58% Sierra County title cost: + 11% over 4 years; home price + 32%

  9. Average New Mexico Title Costs May Compare Favorably to Surrounding States

  10. But N.M.consumers lack opportunities to benefit from competition on price/value 25% savings

  11. Competitive opportunities increase with size of transaction

  12. Alternative Title Insurance Rate Systems • Promulgated Rates: NM, TX, FL • Nominally Competitive Rates • Prior Approval (e.g., • File and Use (e.g., • Governmental Title Guarantee: IA

  13. Challenges for Legislative/ Regulatory Reform • Concentrated industry • “Reverse competition” (marketing to agents/brokers, not consumers) • Complex, infrequently purchased product • Least-educated consumers vulnerable to excessive pricing if regulatory oversight is removed • Urban-rural differences

  14. Recommendation: Allow price and value competition to develop, within protective regulatory framework • e.g., Florida Model – promulgated rates, with rebates allowed to consumers at closing California Model – Commissioner sets maximum allowable rates for residential policies Secondary Recommendation: Biannual rate hearings

  15. Title Insurance Reform Gathers Momentum • Think New Mexico policy report • Reform supported by editorials in 10 New Mexico newspapers • Attorney General King supports reform • PRC asks Gov.Richardson to place Title Insurance on Call for 2008

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