SENATE BILL 477
53rd legislature - STATE OF NEW MEXICO - first session, 2017
INTRODUCED BY
Elizabeth "Liz" Stefanics
AN ACT
RELATING TO INSURANCE; ENACTING THE TITLE INSURANCE MARKET STABILIZATION ACT; CREATING A POOL FOR HIGH-RISK TITLE INSURANCE FOR PROPERTIES AFFECTED BY INTERGOVERNMENTAL JURISDICTION DISPUTES; ESTABLISHING THE NEW MEXICO TITLE INSURANCE BOARD; PROVIDING FOR RULEMAKING; PROVIDING DEFINITIONS.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. [NEW MATERIAL] SHORT TITLE.--This act may be cited as the "Title Insurance Market Stabilization Act".
SECTION 2. [NEW MATERIAL] DEFINITIONS.--As used in the Title Insurance Market Stabilization Act:
A. "board" means the board of directors of the pool;
B. "high-risk title insurance" means title insurance provided to properties in New Mexico where, due to a jurisdictional dispute between federally recognized Indian nations, tribes or pueblos and the state or its political subdivisions, title insurance is either unavailable in the regular insurance market or available at a cost greater than four hundred percent of the cost of title insurance without coverage for easements;
C. "insurer" means an insurance company authorized to transact title insurance business in this state;
D. "pool" means the New Mexico title insurance pool;
E. "program participant" means a person who purchases title insurance through the pool; and
F. "title insurance" means "title insurance", as defined in the New Mexico Title Insurance Law.
SECTION 3. [NEW MATERIAL] TITLE INSURANCE POOL CREATED--BOARD.--
A. There is created a nonprofit entity to be known as the "New Mexico title insurance pool". An administrator for the pool shall be selected pursuant Section 11 of the Title Insurance Market Stabilization Act who shall be supervised by the board of directors created in Subsection C of this section.
All insurers shall organize and remain members of the pool as a condition of their authority to transact insurance business in this state.
B. The superintendent of insurance shall, within sixty days after the effective date of the Title Insurance Market Stabilization Act, give notice to all insurers of the time and place for the initial organizational meeting of the pool. Each member of the pool shall be entitled to one vote in person or by proxy at the organizational meeting.
C. A board of directors is created to set policy and supervise the administration of the pool. The board shall consist of the superintendent of insurance or the superintendent's designee, who shall serve as the chair of the board; two members appointed by the members of the pool; and four members appointed by the superintendent of insurance. The members appointed by the superintendent of insurance shall consist of four residents of New Mexico who are not professionally affiliated with an insurer, at least one of whom shall be an individual who is insured by the pool.
D. The members of the board appointed by the members of the pool shall be appointed for initial terms of four years or less, staggered so that the term of one member shall expire on June 30 of every other year. The members of the board appointed by the superintendent shall be appointed for initial terms of four years or less, staggered so that the term of one member expires on June 30 of each year. Following the initial terms, members of the board shall be appointed for terms of four years. If the members of the pool fail to make the initial appointments required by this subsection within sixty days following the first organizational meeting, the superintendent of insurance shall make those appointments. Whenever a vacancy on the board occurs, the superintendent of insurance shall fill the vacancy by appointing a person to serve the balance of the unexpired term. The person appointed shall meet the requirements for initial appointment to that position. Members of the board may be reimbursed from the pool subject to the limitations provided by the Per Diem and Mileage Act and shall receive no other compensation, perquisite or allowance.
E. The board shall submit a plan of operation to the superintendent of insurance and any amendments to it necessary or suitable to ensure the fair, reasonable and equitable administration of the pool.
F. The superintendent of insurance shall, after notice and hearing, approve the plan of operation; provided that it is determined to ensure the fair, reasonable and equitable administration of the pool and provides for the sharing of pool losses on an equitable, proportionate basis among the members of the pool. The plan of operation shall become effective upon approval in writing by the superintendent of insurance consistent with the date on which coverage under the Title Insurance Market Stabilization Act is made available. If the board fails to submit a plan of operation within one hundred eighty days after the appointment of the board, or any time thereafter fails to submit necessary amendments to the plan of operation, the superintendent shall, after notice and hearing, adopt and promulgate such rules as are necessary or advisable to effectuate the provisions of the Title Insurance Market Stabilization Act. Rules promulgated by the superintendent of insurance shall continue in force until modified by the superintendent of insurance or superseded by a subsequent plan of operation submitted by the board and approved by the superintendent of insurance.
SECTION 4. [NEW MATERIAL] PLAN OF OPERATION.--The plan of operation submitted by the board to the superintendent of insurance shall:
A. establish procedures for the handling and accounting of assets and money of the pool;
B. establish regular times and places for meetings of the board;
C. establish procedures for records to be kept of all financial transactions and for annual fiscal reporting to the superintendent of insurance;
D. contain additional provisions necessary and proper for the execution of the powers and duties of the pool;
E. establish procedures for the collection of assessments from all members of the pool to provide for claims paid under the plan and for administrative expenses incurred or estimated to be incurred during the period for which the assessment is made;
F. establish the amount of assessment pursuant to Section 10 of the Title Insurance Market Stabilization Act that shall be imposed annually at the end of each calendar year and that shall be due and payable within thirty days of the receipt of the assessment notice;
G. establish procedures for the selection of a pool administrator in accordance with Section 11 of the Title Insurance Market Stabilization Act;
H. develop and implement a program to publicize the existence of the plan, the eligibility requirements and procedures for enrollment in the plan and to maintain public awareness of the plan; and
I. establish penalties for non-collection of assessments from pool members.
SECTION 5. [NEW MATERIAL] NOTICE OF POOL.--
A. Commencing September 1, 2017, every insurer shall provide a notice and an application for coverage by the pool to any person who receives:
(1) a rejection of coverage of title insurance;
(2) a notice that the rate for title insurance will exceed the rates of a pool policy; or
(3) a notice of reduction or limitation of coverage, including a restrictive rider, from an insurer if the effect of the reduction or limitation is to substantially reduce coverage compared to the coverage available for property considered a standard risk for the type of coverage provided by the plan.
B. The notice required by Subsection A of this section shall state that, effective January 1, 2018 or an earlier date, that person is eligible to apply for title insurance provided by the pool. Application for the title insurance shall be on forms prescribed by the board and made available to all insurers.
SECTION 6. [NEW MATERIAL] BOARD POWERS AND DUTIES.--The board shall have the general powers and authority granted under the laws of this state to insurance companies licensed to transact title insurance business. In addition, the board shall have the specific authority to:
A. enter into contracts as are necessary or proper to carry out the provisions and purposes of the Title Insurance Market Stabilization Act, including the authority, with the approval of the superintendent of insurance, to enter into contracts with similar pools of other states for the joint performance of common administrative functions or with persons or other organizations for the performance of administrative functions. The pool shall comply with the Procurement Code, except as otherwise provided in the Title Insurance Market Stabilization Act;
B. sue or be sued, including taking any legal action as necessary to avoid the payment of improper claims against the pool or the coverage provided by or through the pool;
C. establish appropriate rates, rate schedules, rate adjustments, expense allowances, agent referral fees, claim reserve formulas and any other actuarial functions appropriate to the operation of the pool. Rates and rate schedules may be adjusted for appropriate risk factors such as age and area variation in claim costs and shall take into consideration appropriate risk factors in accordance with established actuarial underwriting practices;
D. assess members of the pool in accordance with the provisions of the Title Insurance Market Stabilization Act and make initial and interim assessments as may be reasonable and necessary for the organizational or interim operating expenses of the pool. Interim assessments shall be credited as offsets against any regular assessments due following the close of the calendar year. Interim assessments may include anticipated expenses of the next year that the board determines are reasonable and necessary for the operating expenses of the pool;
E. issue policies of insurance in accordance with the requirements of the Title Insurance Market Stabilization Act;
F. appoint appropriate legal, actuarial and other committees as necessary to provide technical assistance in the operation of the pool, policy and other contract design and any other function within the authority of the pool; and
G. conduct periodic audits to ensure the general accuracy of the financial data submitted to the pool. The board shall cause the pool to have an annual audit of its operations by an independent certified public accountant.
SECTION 7. [NEW MATERIAL] EXPANSION OF PROGRAMS.--The board may:
A. establish a plan to offer individuals with eligible property the ability to purchase title insurance;
B. establish eligibility and coverage criteria as needed for program participants;
C. establish the cost-sharing amounts payable by a program participant; and
D. participate with and receive funding from any federal agency designated to administer expanded coverage programs for state high-risk title insurance pools.
SECTION 8. [NEW MATERIAL] EXAMINATION.--The pool shall be subject to and responsible for examination by the superintendent of insurance. Not later than March 1 of each year, the board shall submit to the superintendent of insurance an audited financial report for the preceding calendar year in a form approved by the superintendent.
SECTION 9. [NEW MATERIAL] POLICY FORMS.--All policy forms issued by the pool shall conform in substance to prototype forms developed by the pool and shall be filed with and approved by the superintendent of insurance before they are issued.
SECTION 10. [NEW MATERIAL] ASSESSMENTS.--
A. Following the close of each fiscal year, the pool administrator shall determine the net premium, being premiums less administrative expense allowances, the pool expenses and claim expense losses for the year, taking into account investment income and other appropriate gains and losses. The assessment for each insurer shall be determined by multiplying the total cost of pool operation by a fraction, the numerator of which equals that insurer's premium and subscriber contract charges or their equivalent for title insurance written in the state during the preceding calendar year and the denominator of which equals the total of all premiums and subscriber contract charges written in the state. The board may adopt other or additional methods of adjusting the formula to achieve equity of assessments among pool members.
B. If assessments exceed actual losses and administrative expenses of the pool, the excess shall be held at interest and used by the board to offset future losses or to reduce pool premiums. As used in this subsection, "future losses" includes reserves for incurred, but not reported, claims.
C. The proportion of participation of each member in the pool shall be determined annually by the board based on annual statements and other reports deemed necessary by the board and filed with it by the member. Any deficit incurred by the pool shall be recouped by assessments apportioned among the members of the pool pursuant to the assessment formula provided by Subsection A of this section; provided that the assessment for any pool member shall be allowed as a fifty percent credit on the premium tax return for that member.
D. The board may abate or defer, in whole or in part, the assessment of a member of the pool if, in the opinion of the board, payment of the assessment would endanger the ability of the member to fulfill its contractual obligation. In the event an assessment against a member of the pool is abated or deferred in whole or in part, the amount by which such assessment is abated or deferred may be assessed against the other members in a manner consistent with the basis for assessments set forth in Subsection A of this section. The member receiving the abatement or deferment shall remain liable to the pool for the deficiency for four years.
SECTION 11. [NEW MATERIAL] POOL ADMINISTRATOR--SELECTION--DUTIES.--
A. The board shall select a pool administrator through a competitive bidding process. The board shall evaluate bids based on criteria established by the board that shall include:
(1) proven ability to handle title insurance; (2) efficiency of claim-paying procedures;
(3) an estimate of total charges for administering the plan; and
(4) ability to administer the pool in a cost-efficient manner.
B. The pool administrator shall serve for a period of three years subject to removal for cause. At least one year prior to the expiration of each three-year period of service by the pool administrator, the board shall invite all interested parties, including the current administrator, to submit bids to serve as the pool administrator for the succeeding three-year period. Selection of the administrator for a succeeding period shall be made at least six months prior to the expiration of a three-year period of service by a pool administrator.
C. The pool administrator shall:
(1) perform all eligibility and administrative claim payment functions relating to the pool;
(2) establish a premium billing procedure for collection of premiums from insured persons. Billings shall be made on a periodic basis, not less than monthly, as determined by the board;
(3) perform all necessary functions to ensure timely payment of benefits to persons covered under the pool, including:
(a) making information available relating to the proper manner of submitting a claim for benefits to the pool and distributing forms upon which submission shall be made; and
(b) evaluating the eligibility of each claim for payment by the pool;
(4) submit regular reports to the board regarding the operation of the pool. The frequency, content and form of the report shall be as determined by the board; and
(5) following the close of each fiscal year, determine net written and earned premiums, the expense of administration and the paid and incurred losses for the year and report this information to the board and the superintendent of insurance on a form prescribed by the superintendent.
D. The administrator shall be paid as provided in the contract negotiated pursuant to the process for selection of the pool administrator established by the board.
SECTION 12. [NEW MATERIAL] ELIGIBILITY.--
A. Property is eligible for a pool policy if on the effective date of coverage or renewal of coverage the only insurance available on the open market is high-risk title insurance.
B. An individual is not eligible for coverage by the pool if the individual has voluntarily terminated coverage by the pool within the past twelve months and did not have other continuous coverage during that time.
SECTION 13. [NEW MATERIAL] POOL POLICY.--
A. A pool policy offered under the Title Insurance Market Stabilization Act shall contain provisions under which the pool is obligated to renew the contract until the day on which the property for which the contract is issued first becomes eligible for non-high-risk title insurance.
B. The pool shall not change the rates for pool policies except on a class basis with a clear disclosure in the policy of the right of the pool to do so.
SECTION 14. [NEW MATERIAL] RULES.--The superintendent of insurance shall:
A. adopt rules that provide for disclosure by members of the pool of the availability of insurance coverage from the pool;
B. adopt rules that implement the provisions of the Title Insurance Market Stabilization Act; and
C. adopt any other rules deemed necessary in order to carry out the provisions of the Title Insurance Market Stabilization Act.
SECTION 15. [NEW MATERIAL] COLLECTIVE ACTION.--Neither the participation by insurers in the pool, the establishment of rates, forms or procedures for coverages issued by the pool nor any other joint or collective action required by the Title Insurance Market Stabilization Act shall be the basis of any legal action, civil or criminal liability or penalty against the members of the pool either jointly or separately.
SECTION 16. [NEW MATERIAL] RATES STANDARD RISK RATE.--
A. The pool shall determine a standard risk rate by actuarially calculating the individual rate that an insurer would charge for an individual policy with the pool benefits issued for a property that is a standard risk. Separate schedules of standard risk rates established by rule of the superintendent of insurance may be used. The rates charged for pool coverage shall be no more than two hundred percent of the cost of standard risk title insurance without coverage for easements.
B. The board shall adopt a low-income premium schedule that provides coverage at lower rates for those property owners with an income less than four hundred percent of the current federal poverty level guidelines applicable to New Mexico, published by the United States department of health and human services. For property owners with household incomes of one hundred ninety-nine percent of the federal poverty level or lower, the premium reduction shall be seventy-five percent. For property owners with household incomes of two hundred percent to two hundred ninety-nine percent of the federal poverty level, the premium reduction shall be fifty percent. For property owners with household incomes of three hundred percent to three hundred ninety-nine percent of the federal poverty level, the premium reduction shall be twenty-five percent. No property owner shall be eligible for a low-income premium reduction if the premium is paid by a third party who is not a family member.
C. All rates and rate schedules shall be submitted to the superintendent of insurance for approval.
SECTION 17. [NEW MATERIAL] EXEMPTION.--The pool is exempt from payment of all fees and all taxes levied by this state or any of its political subdivisions.
SECTION 18. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2017.
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