SENATE BILL 497
48th legislature - STATE OF NEW MEXICO - second session, 2008
INTRODUCED BY
Cisco McSorley
AN ACT
RELATING TO INSURANCE; REQUIRING THE SUPERINTENDENT OF INSURANCE TO SET MAXIMUM TITLE INSURANCE PREMIUM RATES; AUTHORIZING FREE-MARKET COMPETITION BELOW THE MAXIMUM RATES; REPLACING THE ANNUAL TITLE INSURANCE PREMIUM HEARINGS WITH BIENNIAL TITLE INSURANCE PREMIUM HEARINGS; REVISING REPORTING DUTIES FOR TITLE INSURERS AND TITLE INSURANCE AGENTS; LIMITING LIABILITY FOR NEGLIGENT TITLE SEARCHES TO TITLE INSURERS; REDUCING THE MAINTENANCE ASSESSMENT; ADDING TITLE INSURANCE INFORMATION TO CONSUMER INFORMATION SYSTEMS DEVELOPED BY THE SUPERINTENDENT; SETTING THE INSURANCE PREMIUM SPLIT BETWEEN TITLE INSURERS AND TITLE INSURANCE AGENTS; AMENDING, REPEALING AND ENACTING SECTIONS OF THE NMSA 1978.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
Section 1. Section 59A-17-11.1 NMSA 1978 (being Laws 2007, Chapter 367, Section 6) is amended to read:
"59A-17-11.1. CONSUMER INFORMATION.--
A. The superintendent shall use, develop or cause to be developed a consumer information system that will provide and disseminate price and other relevant information on a readily available basis to purchasers of homeowners, private passenger non-fleet automobile or property insurance for personal, family or household needs as well as for title insurance and any other types of personal or commercial insurance designated by the superintendent. To the extent deemed necessary and appropriate by the superintendent, insurers, advisory organizations and other persons or organizations involved in conducting the business of insurance in New Mexico, to which this section applies, shall cooperate in the development and utilization of a consumer information system.
B. An insurer writing homeowners insurance or private passenger non-fleet automobile insurance in New Mexico shall, upon renewal or upon the transfer of a policy to another insurer under the same ownership or management as the transferring insurer, provide its policyholders with written notification of their right to obtain from the insurer a detailed written explanation of the reasons why their policy premium has changed or is about to change."
Section 2. Section 59A-30-2 NMSA 1978 (being Laws 1985, Chapter 28, Section 2) is amended to read:
"59A-30-2. PURPOSE AND LEGISLATIVE INTENT OF ARTICLE.--
A. The purpose of the New Mexico Title Insurance Law is to provide a comprehensive body of law for the effective regulation and active supervision of the business of title insurance transacted within this state in response to the McCarran-Ferguson Act (P.L. 79-15, 15 U.S.C. Sections 1011-1015).
B. The legislature intends [that the business of title insurance be totally regulated by the state to provide for the protection of consumers and purchasers of title insurance policies and the financial stability of the title insurance industry] to promote the public welfare by regulating title insurance. Nothing in the New Mexico Title Insurance Law is intended to prohibit or discourage reasonable competition."
Section 3. Section 59A-30-3 NMSA 1978 (being Laws 1985, Chapter 28, Section 3, as amended) is amended to read:
"59A-30-3. DEFINITIONS.--As used in the New Mexico Title Insurance Law:
A. "agency agreement" means a document executed by a title insurer and title insurance agent [which] that defines the compensation of the title insurance agent and the scope of the title insurance agent's authority;
B. "business of title insurance" means:
(1) issuing as title insurer or offering to issue as title insurer a title insurance policy; or
(2) transacting or proposing to transact by a title insurer or title insurance agent any of the following activities when conducted or performed in contemplation of the issuance of a title insurance policy:
(a) soliciting or negotiating the issuance of a title insurance policy;
(b) guaranteeing, warranting or otherwise insuring the correctness of title searches;
(c) executing [of] title insurance policies;
(d) effecting contracts of reinsurance;
(e) abstracting, searching or examining titles; or
(f) doing or proposing to do any business in substance equivalent to the business of title insurance in a manner designed to evade the provisions of the New Mexico Title Insurance Law or other laws applicable to the business of title insurance;
C. ["charge"] "closing, settlement and escrow fees" means any consideration, other than premiums billed by a title insurance agent or title insurer or both, for the performance of services, including but not necessarily limited to consideration for the handling of escrows, settlements, closings, preparation of abstracts, consideration for services commenced but not completed and consideration for title searches conducted for a purpose other than issuance of a title insurance policy, but not including consideration collected by a title insurer or title insurance agent when the consideration is limited to the amount billed for services rendered by a third party;
D. "escrow" means written instruments, money or other items deposited by one party with a depository, escrow agent or escrowee for delivery to another party upon the performance of a specified condition or the happening of a certain event;
[D.] E. "premium" means the consideration for issuing a title insurance policy and includes the consideration for searching and examining a title when conducted or performed for the purpose of the issuance of a title insurance policy;
F. "referral" means the directing or the exercising of any power or influence over the direction of title insurance business, whether or not the consent or approval of any other person is sought or obtained with respect to the referral;
[E.] G. "available funds" means funds subject to immediate withdrawal by cash or check in a depository account with a financial institution, held in the name of and subject to the control of a title insurance agent, title insurer or third party fiduciary, not including a person or entity that is a party to the transaction, cooperating in the closing of a transaction with a title insurance agent or title insurer;
[F.] H. "title insurance agent" means a person licensed as an agent under the Insurance Code and appointed by a title insurer who:
(1) determines insurability and issues title insurance reports or policies or both based on the performance or review of a search or abstract of title; and
(2) performs one or more of the following functions:
(a) collects or disburses premiums, escrow or security deposits or other funds;
(b) handles escrows, settlements or closings;
(c) solicits or negotiates title insurance business; or
(d) records closing documents;
[G.] I. "title insurance policy" or "policy" means a contract indemnifying against loss or damage arising from any of the following [which] that exist on or before the effective date of the policy:
(1) defects in the insured title;
(2) liens or encumbrances on the insured title;
(3) unmarketability of the insured title; [or]
(4) invalidity or unenforceability of liens or encumbrances on the property [which] that is the subject of the policy;
(5) lack of legal right of access to the property; or
(6) unenforceability of rights in title to the property.
"Title insurance policy" or "policy" does not include an abstract; and
[H.] J. "title insurer" means [any person] an association, company, partnership, trust or corporation authorized under the laws of this state to transact as insurer the business of title insurance."
Section 4. Section 59A-30-4 NMSA 1978 (being Laws 1985, Chapter 28, Section 4) is amended to read:
"59A-30-4. CONTROL AND SUPERVISION BY SUPERINTENDENT.--
A. Title insurers and title insurance agents shall operate in New Mexico under the control and supervision of the superintendent. The superintendent shall promulgate such rules and regulations as are necessary to carry out the provisions of the New Mexico Title Insurance Law [including rules and regulations requiring uniform forms of policies and uniform premiums]. The superintendent may adopt uniform rules and regulations as to underwriting standards and practices, including but not limited to rules and regulations [which] that prohibit title insurers from insuring specified risks [which] that the superintendent determines may pose an unreasonable risk to the financial stability of title insurers.
B. No title insurer or title insurance agent shall collect any premium, issue any title insurance policy or agency agreement or reinsure any portion of the risk assumed under any title insurance policy other than in conformance with the New Mexico Title Insurance Law and rules and regulations adopted by the superintendent as authorized by the New Mexico Title Insurance Law."
Section 5. Section 59A-30-6 NMSA 1978 (being Laws 1985, Chapter 28, Section 6, as amended) is amended to read:
"59A-30-6. PREMIUMS [AGENCY AGREEMENTS]--DUTY TO [FIX] SET MAXIMUM RATES--[EXCEPTION] ALLOWING FREE-MARKET COMPETITION.--
A. The superintendent shall promulgate [the] maximum premium rates [of title insurers and title insurance agents] for title insurance policies and [the percentage of premium to be retained by title insurers under agency agreements, except that premium rates for reinsurance as between title insurers shall not be promulgated by the superintendent] maximum charges for closing, settlement and escrow fees. No premium that [has not been] exceeds the maximum premium rate promulgated by the superintendent shall be charged for [any] a title insurance policy. [The superintendent shall not promulgate charges of title insurers and title insurance agents other than premium rates for title insurance policies and the percentage of premium to be retained by title insurers under agency agreements.] Charges for closing, settlement and escrow fees shall not exceed the maximum charge set by the superintendent.
B. The superintendent shall promulgate additional maximum premium rates for searches or examinations of title conducted or performed for the purpose of issuance of a title insurance policy when the search or examination involves more than one chain of title or other unusual complexity. No additional premium that exceeds the maximum additional premium rates promulgated by the superintendent shall be charged for a title insurance policy.
C. Title insurers and title insurance agents may engage in free-market competition and charge less than the maximum premium rates promulgated by the superintendent.
[C.] D. Maximum premium rates and maximum charges for closing, settlement and escrow fees promulgated by the superintendent shall not be excessive, inadequate or unfairly discriminatory and shall contain an allowance permitting a profit that is not unreasonable in relation to the riskiness of the business of title insurance. Premium rates may include an allowance for recoupment of assessments made pursuant to the Title Insurance Guaranty Act."
Section 6. Section 59A-30-7 NMSA 1978 (being Laws 1985, Chapter 28, Section 7) is amended to read:
"59A-30-7. FILING OF RATES--REPORTING OF EXPERIENCE.--[The superintendent shall promulgate reasonable rules, including rules providing statistical plans, for use thereafter by all title insurers and title insurance agents in the recording and reporting of loss and expense experience, so that the experience of title insurers and title insurance agents may be made available to him at least annually in such form and detail as may be necessary to aid him in promulgating premium rates.]
A. Title insurers shall file rates and supplementary rate information with the superintendent prior to their use in New Mexico.
B. The superintendent shall disapprove a filed title insurance rate if the superintendent finds that the rate is inadequate or unfairly discriminatory under the rate standards as set forth in Section 59A-17-6 NMSA 1978. The superintendent may at any time disapprove a filed rate after giving notice of hearing pursuant to the provisions of Subsection A of Section 59A-4-16 NMSA 1978 to every insurer and advisory organization that adopted the rate. The superintendent's notice or order of disapproval shall specify how the filed rate fails to meet the standards as set forth in Section 59A-17-6 NMSA 1978. The notice or order shall state an effective date no sooner than thirty business days after the date of the notice or order when the insurer shall discontinue the use of the filed rate. The notice or order shall not affect any policy made before the effective date of the notice or order.
C. Title insurers and title insurance agents shall file with the superintendent on or before June 30 of each calendar year experience reports in such form and detail as may be prescribed by the superintendent."
Section 7. Section 59A-30-8 NMSA 1978 (being Laws 1985, Chapter 28, Section 8, as amended) is amended to read:
"59A-30-8. HEARINGS--NOTICE.--
A. The superintendent shall hold [an annual] a hearing during [November] December of each even-numbered calendar year to consider promulgation of maximum premium rates and maximum charges for closing, settlement and escrow fees and any other matters related to the regulation of the business of title insurance deemed necessary by the superintendent.
B. The superintendent may, in [his] the superintendent's discretion, hold a public hearing at any time to consider [promulgation of premium rates and such other matters and] subjects related to the regulation of the business of title insurance as the superintendent shall determine necessary or proper.
C. Notice of the public hearings provided for in Subsections A and B of this section shall be as provided in Subsection A of Section 59A-4-16 NMSA 1978.
D. The superintendent may promulgate maximum premium rates and forms of title insurance policies only after a public hearing as provided in [Subsections] Subsection A [and B] of this section.
E. The superintendent shall issue [his] a decision within sixty days following the conclusion of a public hearing provided for in [Subsections] Subsection A [and B] of this section. However, if the superintendent determines that the data and information presented to the superintendent pursuant to Section 59A-30-7 NMSA 1978 [is] are incomplete, inaccurate or otherwise insufficient to determine whether the change in maximum rates is warranted, the superintendent shall require the title insurers or the title insurance agents or both to furnish the additional necessary data and information, and, in such event, the period of time allowed for the superintendent to issue [his] a decision shall commence from the date such additional data and information [is] are furnished."
Section 8. Section 59A-30-11 NMSA 1978 (being Laws 1985, Chapter 28, Section 11, as amended) is amended to read:
"59A-30-11. UNDERWRITING STANDARDS AND RECORD
RETENTION.--
A. No title insurance policy may be written unless the title insurer or its title insurance agent has caused to be conducted a reasonable search and examination of the title using an abstract plant meeting the requirements of Section 59A-12-13 NMSA 1978 and has caused to be made a determination of insurability of title in accordance with sound underwriting practices. [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.] 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 party by 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 title insurance agent and the agent's employees shall not be named as parties in any action for negligent search and examination.
B. Evidence of the examination of title and determination of insurability shall be preserved and retained in the files of the title insurer or its title insurance agent for a period of not less than fifteen years after the title insurance policy has been issued. Instead of retaining the original evidence, the title insurer or title insurance agent may in the regular course of business establish a system whereby all or part of the evidence is recorded, copied or reproduced by any process that accurately and legibly reproduces or forms a durable medium for reproducing the contents of the original. This subsection shall not apply to:
(1) a title insurer assuming liability through a contract of reinsurance; or
(2) a title insurer acting as coinsurer if one of the other coinsuring title insurers has complied with this section."
Section 9. Section 59A-30-12 NMSA 1978 (being Laws 1985, Chapter 28, Section 12) is amended to read:
"59A-30-12. MAINTENANCE ASSESSMENT.--The superintendent shall determine a rate of assessment and collect a maintenance fee in an amount not to exceed [one] one-half percent of the correctly reported gross title insurance premiums on policies written in New Mexico of all authorized title insurers. The fee required by this section is in addition to all other taxes and fees now imposed or that may be subsequently imposed and that are not in conflict with this article. The superintendent, after taking into account the unexpended funds produced by this fee, if any, shall adjust the rate of assessment each year to produce the amount of funds that [he] the superintendent estimates will be necessary to pay all the expenses of regulating the business of title insurance during the succeeding year. The superintendent in promulgating premium rates shall take into account assessments made under this section."
Section 10. Section 59A-30-14 NMSA 1978 (being Laws 1985, Chapter 28, Section 14, as amended) is amended to read:
"59A-30-14. OTHER PROVISIONS APPLICABLE.--To the extent not in conflict with the New Mexico Title Insurance Law, the following articles and provisions of the Insurance Code shall also apply to title insurers, title insurance agents and the business of title insurance:
A. Chapter 59A, Article 1 NMSA 1978;
B. Chapter 59A, Article 2 NMSA 1978;
C. Chapter 59A, Article 4 NMSA 1978;
D. Chapter 59A, Article 5 NMSA 1978;
E. Chapter 59A, Article 6 NMSA 1978;
F. Chapter 59A, Article 7 NMSA 1978;
G. Chapter 59A, Article 8 NMSA 1978;
H. Chapter 59A, Article 9 NMSA 1978;
I. Chapter 59A, Article 10 NMSA 1978;
J. Chapter 59A, Article 11 NMSA 1978;
K. Chapter 59A, Article 12 NMSA 1978;
L. the Unauthorized Insurers Law;
M. Chapter 59A, Article 16 NMSA 1978;
N. the Insurance Fraud Act;
O. Chapter 59A, Article 17 NMSA 1978;
P. Chapter 59A, Article 18 NMSA 1978;
[O.] Q. Chapter 59A, Article 34 NMSA 1978; and
[P.] R. The Insurance Holding Company Law."
Section 11. A new section of the New Mexico Title Insurance Law is enacted to read:
"[NEW MATERIAL] PROHIBITED PRACTICES.--
A. A title insurer, title insurance agent or other person shall not give or receive, directly or indirectly, any consideration or thing of value for the referral of title insurance business or escrow or other service provided by a title insurer or title insurance agent.
B. A title insurer shall not enter into a reinsurance agreement with a referrer of title insurance business or an affiliate of a referrer of title insurance business without the prior written approval of the superintendent.
C. A title insurer or title insurance agent doing business in the same county as a title insurer or title insurance agent who may be in violation of the prohibitions or limitations of this section shall have a cause of action against the violating title insurer or title insurance agent or recipient and, upon establishing the existence of a violation, shall be entitled to injunctive relief as the court deems necessary or desirable to prevent future violations of this section. The court may award court costs and reasonable attorney fees to the prevailing party in any action under this subsection."
Section 12. A new section of the New Mexico Title Insurance Law is enacted to read:
"[NEW MATERIAL] PORTION OF PREMIUM ALLOCATED TO TITLE INSURANCE AGENT.--Title insurance agents are entitled to retain eighty-nine percent of the gross premium paid on title insurance commitments, binders, policies and endorsements and shall remit eleven percent of the gross premium to the title insurer."
Section 13. A new section of the New Mexico Title Insurance Law is enacted to read:
"[NEW MATERIAL] REQUIRED INSURANCE COVERAGE
PROVISIONS.--In addition to standard title insurance coverage and any other coverage contracted for by the parties, title insurance policies issued in New Mexico shall provide coverage against claims based on:
A. rights or claims of parties in possession not shown by the public records; or
B. easements, or claims of easements, not shown by the public records."
Section 14. TEMPORARY PROVISION.--Until the superintendent of insurance promulgates maximum premium rates, the premium rates promulgated by the superintendent of insurance prior to the effective date of this act are deemed to be the equivalent of maximum premium rates.
Section 15. REPEAL.--Sections 59A-30-5 and 59A-30-15 NMSA 1978 (being Laws 1985, Chapter 28, Sections 5 and 16) are repealed.
Section 16. SEVERABILITY.--If any part or application of this act is held invalid, the remainder or its application to other situations or persons shall not be affected.
Section 17. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2008.
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