WSR 09-14-039

PROPOSED RULES

OFFICE OF

INSURANCE COMMISSIONER

[ Insurance Commissioner Matter No. R 2008-22 -- Filed June 24, 2009, 1:50 p.m. ]

Original Notice.

Preproposal statement of inquiry was filed as WSR 08-13-098.

Title of Rule and Other Identifying Information: Reporting of affiliated business ownership of title insurance agents.

Hearing Location(s): Insurance Commissioner's Office, Room TR 120, 5000 Capitol Boulevard, Tumwater, WA 98504-0255, on August 4, 2009, at 10:00 a.m.

Date of Intended Adoption: August 11, 2009.

Submit Written Comments to: Kacy Scott, P.O. Box 40258, Olympia, WA 98504-0258, e-mail KacyS@oic.wa.gov, fax (360) 586-3109, by August 3, 2009.

Assistance for Persons with Disabilities: Contact Lorie Villaflores by August 3, 2009, TTY (360) 586-0241 or (360) 725-7087.

Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: RCW 48.29.015 requires that title insurance agents file an annual report setting forth the name and address of those persons who have had a financial interest in the title insurance agent during the year. In addition the report must include the percent of title orders originating from each of those persons who own a financial interest in the title insurance agent. The purpose of the proposed rules is to establish the information that must be included in the report, the procedures for filing the report, the procedures for reporting the sources of title orders received, and record-keeping requirements related to the reporting procedures.

Reasons Supporting Proposal: The proposed rules will provide the information required in the annual report to the commissioner, provide procedures for filing the report, and establish record-keeping requirements associated with preparing the report.

Statutory Authority for Adoption: RCW 48.02.060 and 48.29.005.

Statute Being Implemented: RCW 48.29.015.

Rule is not necessitated by federal law, federal or state court decision.

Name of Proponent: Mike Kreidler, insurance commissioner, governmental.

Name of Agency Personnel Responsible for Drafting: Jim Tompkins, P.O. Box 40258, Olympia, WA 98504-0258, (360) 725-7036; Implementation and Enforcement: Jeff Baughman, P.O. Box 40255, Olympia, WA 98504-0255, (360) 725-7156.

No small business economic impact statement has been prepared under chapter 19.85 RCW. Although most of the state's title insurance agents are small businesses these proposed rules impose only a minor cost on them. The effort on the part of title insurance agents to make any of the necessary verifications or identifications of "hidden" sources of referrals to comply with these proposed rules is estimated to be significantly less than 1% of the staff time devoted to running a title insurance agent's office.

A cost-benefit analysis is required under RCW 34.05.328. A preliminary cost-benefit analysis may be obtained by contacting Kacy Scott, P.O. Box 40258, Olympia, WA 98504-0258, phone (360) 725-7041, fax (360) 586-3535, e-mail kacys@oic.wa.gov.

June 24, 2009

Mike Kreidler

Insurance Commissioner

OTS-2065.5

Chapter 284-29 WAC

TITLE INSURANCE


NEW SECTION
WAC 284-29-100   Definitions.   For purposes of this rule:

(1) An "affiliate" of, or person "affiliated" with a title insurance agent is a person who directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.

(2) "Associates of producers" has the meaning as set forth in RCW 48.29.010 (3)(f).

(3) "Financial interest" has the meaning as set forth in RCW 48.29.010 (3)(d).

(4) "Person" has the meaning as set forth in RCW 48.01.070.

(5) "Producers of title insurance business or producer" has the meaning as set forth in RCW 48.29.010 (3)(e) and also includes associate of producers as set forth in RCW 48.29.010 (3)(f).

(6) "Report of affiliated business ownership" means a report required by RCW 48.29.015 setting forth the name, address, and percent of title orders originating from those persons who have had a financial interest in a title insurance agent.

(7) "Title insurance agent" has the meaning as set forth in RCW 48.17.010(15).

(8) "Title order" has the same meaning as "preliminary report," "commitment," or "binder" as set forth in RCW 48.29.010 (3)(c) and also includes "title policy" as set forth in RCW 48.29.010 (3)(a).

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NEW SECTION
WAC 284-29-110   No report required.   (1) If a title insurance agent does not have any producers of title insurance business or associates of a producer who own a financial interest in the title insurance agent, then the title insurance agent is not required to file the title insurance agent report of affiliated business ownership.

(2) If a title insurance agent is wholly owned through one or more intermediaries of a company traded on a national stock exchange, then the title insurance agent is not required to file the title insurance agent report of affiliated business ownership.

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NEW SECTION
WAC 284-29-120   Report form.   The title insurance agent report of affiliated business ownership form and instructions as to how and where to submit the form are on the commissioner's web site at www.insurance.wa.gov.

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NEW SECTION
WAC 284-29-130   Report required.   (1) The title insurance agent report of affiliated business ownership must be filed with the commissioner annually by March 15th.

(2) If there is any change or addition to the ownership information contained in the annual report, then the title insurance agent must file an amended report with the commissioner within fifteen days after the end of the month in which the title insurance agent learns of the change or addition.

(3) Changes to the information regarding the percent of title orders originating from each of the producers do not need to be filed with the commissioner except with the annual filing. If the title insurance agent discovers or reasonably should have discovered that the information contained in the annual filing was not correct, then the title insurance agent must file an amended report within fifteen days after the end of the month in which the title insurance agent discovered the incorrect information.

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NEW SECTION
WAC 284-29-140   Identifying producers.   (1) If a person who has a financial interest in a title insurance agent also owns a controlling interest in another producer, then the title insurance agent must report this person and the other business entities controlled by the person as producers who have a financial interest in the title insurance agent. For example if John Brown personally has a financial interest in a title insurance agent and John Brown also owns a controlling interest in ABC Realty Co. and XYZ Home Builders Inc., then the title insurance agent, in addition to reporting John Brown as a producer, must also report ABC Realty Co. and XYZ Home Builders Inc. as producers having a financial interest in the title insurance agent.

(2) In reporting producers who have a financial interest in the title insurance agent, the information about the producer must be sufficient to properly identify the person who is directly in a position to refer or influence the referral of title insurance business to the title insurance agent.

(3) If a producer owns the financial interest in the title insurance agent through one or more intermediary entities, then the identity of the producer and the identity of other entities that the producer owns a controlling interest in that are producers must be set forth in the report. For example, if Henry Smith and Frank Jones own an interest in Joint Venture Co., and Joint Venture Co. has a financial interest in the title insurance agent, then Henry Smith and Frank Jones must be identified in the report as producers who have a financial interest in the title insurance agent, in addition to reporting other entities who are producers that are owned by Henry Smith and Frank Jones.

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NEW SECTION
WAC 284-29-150   Reporting of amount of business.   A title insurance agent must make all reasonable and good faith efforts to determine the source of the title orders that it receives. This must also include information that the title insurance agent obtains when it is also acting as an escrow agent for the transaction. For example:

(1) If a title insurance agent receives a title order in which the seller is XYZ Home Builders Inc., owned by John Brown who has a financial interest in the title insurance agent, then it may be assumed that the source of the title order was John Brown (XYZ Home Builders, Inc.) even though the title order may have been directly received from another person.

(2) If the title insurance agent receives a title order from a producer with a financial interest in the title insurance agent held through one or more intermediary entities, then the specific producer must be identified as the source of the title order. For example, Henry Smith and Frank Jones own an interest in Joint Venture Co., and Joint Venture Co. directly holds the financial interest in the title insurance agent. Henry Smith must be reported as the source of the title insurance business for title orders received from Henry Smith. Likewise, Frank Jones must be reported as the source of title insurance business of orders received from Frank Jones. The amount of business received from both Henry Smith and Frank Jones may not be aggregated and reported as being from Joint Venture Co.

(3) If a title insurance agent receives an order in its escrow department from ABC Realty Co. (owned by John Brown who also has a financial interest in the title insurance agent), and the escrow department then places the title order with the title department of the title insurance agent, then the title insurance agent must report the source of the title order as being ABC Realty Inc.

(4) If the title insurance agent handling the transaction, either through its title department or its escrow department, or both, has information that ABC Realty Inc. (owned by John Brown who has a financial interest in the title insurance agent) is one of the real estate companies involved in the transaction, then it must be assumed that ABC Realty Inc. was the source of the title order unless the title insurance agent has sufficient evidence that the title order was referred to the title insurance agent by another producer.

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NEW SECTION
WAC 284-29-160   Recordkeeping.   (1) A title insurance agent must keep and maintain complete and accurate records of the names and business addresses of those persons who have had a financial interest in the title insurance agent who are reasonably known or reasonably believed by the title insurance agent to be producers.

(2) A title insurance agent must keep and maintain records of its title orders sufficient to identify the source of the title orders.

(3) The records required by WAC 284-29-100 through 284-29-160 must be kept by the title insurance agent for a period of three years after the end of the year being reported upon.

(4) All records of a title insurance agent kept pursuant to WAC 284-29-100 through 284-29-160 must be available to the commissioner or the commissioner's representative during regular business hours.

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Washington State Code Reviser's Office