BILL REQ. #:  S-5306.1 



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SUBSTITUTE SENATE BILL 6847
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State of Washington60th Legislature2008 Regular Session

By Senate Consumer Protection & Housing (originally sponsored by Senators Weinstein, Delvin, Haugen, and Shin; by request of Insurance Commissioner)

READ FIRST TIME 02/08/08.   



     AN ACT Relating to real estate settlement services; amending RCW 48.29.010 and 48.29.140; adding new sections to chapter 48.29 RCW; adding a new section to chapter 18.85 RCW; adding a new section to chapter 18.44 RCW; and adding a new section to chapter 19.146 RCW.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1   RCW 48.29.010 and 2005 c 223 s 14 are each amended to read as follows:
     (1) This chapter relates only to title insurers for real property.
     (2) This code does not apply to persons engaged in the business of preparing and issuing abstracts of title to property and certifying to their correctness so long as the persons do not guarantee or insure the titles.
     (3) For purposes of this chapter, unless the context clearly requires otherwise:
     (a) "Title policy" means any written instrument, contract, or guarantee by means of which title insurance liability is assumed.
     (b) "Abstract of title" means a written representation, provided under contract, whether written or oral, intended to be relied upon by the person who has contracted for the receipt of this representation, listing all recorded conveyances, instruments, or documents that, under the laws of the state of Washington, impart constructive notice with respect to the chain of title to the real property described. An abstract of title is not a title policy as defined in this subsection.
     (c) "Preliminary report," "commitment," or "binder" means reports furnished in connection with an application for title insurance and are offers to issue a title policy subject to the stated exceptions in the reports, the conditions and stipulations of the report and the issued policy, and other matters as may be incorporated by reference. The reports are not abstracts of title, nor are any of the rights, duties, or responsibilities applicable to the preparation and issuance of an abstract of title applicable to the issuance of any report. The report is not a representation as to the condition of the title to real property, but is a statement of terms and conditions upon which the issuer is willing to issue its title policy, if the offer is accepted.
     (d) "Financial interest" means any interest, legal or beneficial, that entitles the holder directly or indirectly to any of the net profits or net worth of the entity in which the interest is held.
     (e) "Producers of title insurance business" means real estate agents and brokers, lawyers, mortgagees, mortgage loan brokers, financial institutions, escrow agents, persons who lend money for the purchase of real estate or interests therein, building contractors, real estate developers and subdividers, and any other person who is or may be in a position to influence the selection of a title insurer or title insurance agent whether or not the consent or approval of any other person is sought or obtained with respect to the selection of the title insurer or title insurance agent.
     (f) "Associates of producers" means any person who has one or more of the following relationships with a producer of title insurance business:
     (i) A spouse, parent, or child of a producer;
     (ii) A corporation or business entity that controls, is controlled by, or is under common control with a producer;
     (iii) An employer, employee, independent contractor, officer, director, partner, franchiser, or franchisee of a producer; or
     (iv) Anyone who has an agreement, arrangement, or understanding with a producer, the purpose or substantial effect of which is to enable the person in a position to influence the selection of a title insurer or title insurance agent to benefit financially from the selection of the title insurer or title insurance agent.

NEW SECTION.  Sec. 2   A new section is added to chapter 48.29 RCW to read as follows:
     (1) A title insurance agent shall maintain records of its title orders sufficient to indicate the source of the title orders.
     (2) Every title insurance agent shall file with the commissioner annually by March 15th of each year for the previous calendar year, unless the commissioner for good cause shown extends the time for filing, a report, on a form prescribed by the commissioner, setting forth:
     (a) The names and addresses of those persons, if any, who have had a financial interest in the title insurance agent during the calendar year, who are known or reasonably believed by the title insurance agent to be producers of title business or associates of producers; and
     (b) The percent of title orders originating from each person who owns, or had owned during the preceding calendar year, a financial interest in the title insurance agent.
     (3) Each title insurance agent shall keep current the information required by that portion of the report required by subsection (2)(a) of this section by reporting all changes or additions within fifteen days after the end of the month in which it learns of each change or addition.
     (4) Each title insurance agent shall file that portion of the report required by subsection (2)(a) of this section with its application for a license.
     (5) Each title insurance agent licensed on the effective date of this section shall file the report required under this section within thirty days after the effective date of this section.

NEW SECTION.  Sec. 3   A new section is added to chapter 48.29 RCW to read as follows:
     (1) A title insurer, title insurance agent, or employee, agent, or other representative of a title insurer or title insurance agent shall not, directly or indirectly, give any fee, kickback, or other thing of value to any person as an inducement, payment, or reward for placing business, referring business, or causing title insurance business to be given to either the title insurer, or title insurance agent, or both.
     (2) A title insurer, title insurance agent, or employee, agent, or other representative of a title insurer or title insurance agent shall not, directly or indirectly, give anything of value to any person in a position to refer or influence the referral of title insurance business to either the title insurance company or title insurance agent, or both, except as permitted under rules adopted by the commissioner.

NEW SECTION.  Sec. 4   A new section is added to chapter 48.29 RCW to read as follows:
     (1) Premium rates for the insuring or guaranteeing of titles shall not be excessive, inadequate, or unfairly discriminatory.
     (2) A rate is not excessive, inadequate, or unfairly discriminatory if it is an actuarially sound estimate of the expected value of all future costs associated with an individual risk transfer. Such costs include claims, claim settlement expenses, operational and administrative expenses, and the cost of capital.

NEW SECTION.  Sec. 5   A new section is added to chapter 48.29 RCW to read as follows:
     (1) Every title insurer shall, before using, file with the commissioner every manual of title insurance rules and rates, rating plan, rate schedule, minimum rate, class rate, and rating rule, and every modification of any of the filings under this subsection which it proposes.
     (2) Every filing shall be accompanied by sufficient information to permit the commissioner to determine whether the filing meets the requirements of section 4 of this act.
     (3) Data used to justify title insurance rates may not include escrow income or expenses. The title insurance company shall include a detailed explanation showing how expenses are allocated between the title operations and escrow operations of the insurer or title insurance agent.
     (4) Every such filing shall state its proposed effective date.
     (5) The commissioner shall review a filing as soon as reasonably possible after it is received, to determine whether it meets the requirements of section 4 of this act.
     (6) The filing's proposed effective date shall be no earlier than thirty days after the date on which the filing is received by the commissioner. By giving notice to the insurer within this thirty days, the commissioner may extend this waiting period for an additional period not to exceed an additional fifteen days. The commissioner may, upon application and for cause shown, waive part or all of the waiting period with respect to a filing the commissioner has not disapproved. If the commissioner does not disapprove the filing during the waiting period, the filing takes effect on its proposed effective date.
     (7) If within the waiting period or any extension thereof as provided in subsection (6) of this section, the commissioner finds that a filing does not meet the requirements of section 4 of this act or the requirements of subsections (2) through (4) of this section, the commissioner shall disapprove the filing and shall give notice to the insurer that the filing has been disapproved. This notice shall specify the respect in which the commissioner finds the filing fails to meet the requirements and shall state that the filing does not become effective as proposed.
     (8) If a filing is not disapproved by the commissioner within the waiting period or any extension thereof, the filing becomes effective as proposed.
     (9) A filing made under this section is exempt from RCW 48.02.120(3). However, the filing and all supporting information accompanying it is open to public inspection only after the filing becomes effective.
     (10) A title insurer or title insurance agent shall not make or issue a title insurance contract or policy, or use or collect any premium on or after a date set by the commissioner by rule, which date shall not be any earlier than January 1, 2010, except in accordance with rates and rules filed with the commissioner as required by this section.
     (11) If at any time subsequent to the applicable review period provided for in subsection (6) of this section, the commissioner has reason to believe that a title insurer's rates do not meet the requirements of section 4 of this act or are otherwise contrary to law, or if any person having an interest in the rates makes a written complaint to the commissioner setting forth specific and reasonable grounds for the complaint and requests a hearing, or if any insurer upon notice of the commissioner's disapproval of a filing made under this section requests a hearing, the commissioner shall hold a hearing within thirty days and shall, in advance of it, give written notice of the hearing to all parties in interest. The commissioner may, by issuing an order, confirm, modify, change, or rescind any previous action, if it is warranted by the facts shown at the hearing. The order shall not affect any contract or policy made or issued prior to a reasonable period of time, to be specified in the order, after the order is issued.
     (12) In any hearing regarding rates filed under this chapter the burden shall be upon the title insurer to prove by a preponderance of the evidence that the rates comply with section 4 of this act.

NEW SECTION.  Sec. 6   A new section is added to chapter 48.29 RCW to read as follows:
     (1) Each title insurer and title insurance agent shall immediately file with the commissioner a schedule of its fees for providing escrow services.
     (2) The schedule shall:
     (a) Be dated to show the date the fees for providing escrow services are to become effective, which date shall be no earlier than fifteen days after the schedule has been filed with the commissioner; and
     (b) Set forth the total fees for providing escrow services by clearly stating the amounts to be charged for the escrow services, the manner in which the fees for the escrow services are to be determined, and any charges that will be charged to the consumer that are not included in the total escrow fee.

NEW SECTION.  Sec. 7   A new section is added to chapter 48.29 RCW to read as follows:
     (1) Each title insurer and title insurance agent shall make available to the public schedules of its currently effective title insurance premiums and fees for providing escrow services.
     (2) The schedules shall:
     (a) Be dated to show the date the title insurance premiums or fees for providing escrow services became effective;
     (b) Be made available to the public during normal business hours in each office of the title insurer and its appointed title insurance agents in this state;
     (c) Be made available on the title insurer's and title insurance agent's web site, if the title insurer or title insurance agent has a web site;
     (d) Set forth the total title insurance premium charged for the title insurance policy issued by the title insurer either by stating the premium for each title insurance policy in given amounts of coverage, or by stating the charge per unit amount of coverage, or by a combination of the two; and
     (e) Set forth the total fees for providing escrow services by clearly stating the amounts to be charged for the escrow services, the manner in which the fees for the escrow services are to be determined, and any charges that will be charged to the consumer that are not included in the total escrow fee.
     (3) Each title insurer and title insurance agent shall keep a complete file of its schedules of title insurance premiums and fees for providing escrow services and all changes and amendments to those schedules until at least one year after they have ceased to be in effect.

Sec. 8   RCW 48.29.140 and 1947 c 79 s .29.14 are each amended to read as follows:
     (1) Premium rates for the insuring or guaranteeing of titles shall not be excessive, inadequate, or unfairly discriminatory.
     (2) Each title insurer shall forthwith file with the commissioner a schedule showing the premium rates to be charged by it. Every addition to or modification of such schedule or of any rate therein contained shall likewise be filed with the commissioner, and no such addition or modification shall be effective until expiration of fifteen days after date of such filing.
     (3) The commissioner may order the modification of any premium rate or schedule of premium rates found by him or her after a hearing to be excessive, or inadequate, or unfairly discriminatory. No such order shall require retroactive modification.
     (4) The commissioner shall by rule set a date, which shall not be earlier than January 1, 2010, by which title insurers must file every manual of rules and rates, rating plan, rate schedule, minimum rate, class rate, and rating rule, and every modification of any of these filings, under sections 4 and 5 of this act, rather than under this section.

NEW SECTION.  Sec. 9   A new section is added to chapter 48.29 RCW to read as follows:
     The commissioner may adopt rules to implement and administer this chapter, including but not limited to:
     (1) Establishing the information to be included in the report required under section 2 of this act;
     (2) Establishing the information required for the filing of rates for title insurance under section 5 of this act;
     (3) Establishing standards which title insurance rate filings must satisfy under section 5 of this act;
     (4) Establishing a date, which date shall not be earlier than January 1, 2010, by which all title insurers selling policies in this state must file their rates with the commissioner under sections 4 and 5 of this act rather than under RCW 48.29.140 and refile any rates that were in effect prior to the date established by the commissioner; and
     (5) Defining what things of value a title insurance insurer or title insurance agent is permitted to give to any person in a position to refer or influence the referral of title insurance business under section 3(2) of this act. In adopting rules under this subsection, the commissioner shall work with representatives of the title insurance and real estate industries and consumer groups in developing the rules.

NEW SECTION.  Sec. 10   A new section is added to chapter 18.85 RCW to read as follows:
     (1) A real estate licensee or person who has a controlling interest in a real estate business shall not, directly or indirectly, give any fee, kickback, payment, or other thing of value to any other real estate licensee as an inducement, reward for placing title insurance business, referring title insurance business, or causing title insurance business to be given to a title insurance agent in which the real estate licensee or person having a controlling interest in a real estate business also has a financial interest.
     (2) A real estate licensee or person who has a controlling interest in a real estate business shall not either solicit or accept, or both, anything of value from: A title insurance company, a title insurance agent, or the employees or representatives of a title insurance company or title insurance agent, that a title insurance company or title insurance agent is not permitted by law or rule to give to the real estate licensee or person who has a controlling interest in a real estate business.
     (3) A real estate licensee or person who has a controlling interest in a real estate business shall not prevent or deter a title insurance company, title insurance agent, or their employees or representatives from delivering to a real estate licensee or its employees, independent contractors, and clients printed promotional material concerning only title insurance services as long as:
     (a) The material is business appropriate and is not misleading or false;
     (b) The material does not malign the real estate licensee, its employees, independent contractors, or affiliates;
     (c) The delivery of the materials is limited to those areas of the real estate licensee's physical office reserved for unrestricted public access; and
     (d) The conduct of the employees or representatives is appropriate for a business setting and does not threaten the safety or health of anyone in the real estate licensee's office.
     (4) A real estate licensee shall not require a consumer, as a condition of providing real estate services, to obtain title insurance from a title insurance agent in which the real estate licensee has a financial interest.

NEW SECTION.  Sec. 11   A new section is added to chapter 18.44 RCW to read as follows:
     (1) An escrow agent, officer or employee of any escrow agent, or person who has a financial interest in an escrow agent shall not, directly or indirectly, give any fee, kickback, payment, or other thing of value to any person as an inducement, reward for placing business, referring business, or causing title insurance business to be given to a title insurance agent in which the escrow agent or person having a financial interest in the escrow agent also has a financial interest.
     (2) An escrow agent or person who has a financial interest in an escrow agent shall not either solicit or accept, or both, anything of value from: A title insurance company, a title insurance agent, or the employees or representatives of a title insurance company or title insurance agent, that a title insurance company or title insurance agent is not permitted by law or rule to give to the escrow agent or person who has a financial interest in the escrow agent.
     (3) An escrow agent or person who has a financial interest in an escrow agent shall not prevent or deter a title insurance company, title insurance agent, or their employees or representatives from delivering to an escrow agent or its employees, independent contractors, and clients printed promotional material concerning only title insurance services as long as:
     (a) The material is business appropriate and is not misleading or false;
     (b) The material does not malign the escrow agent, its employees, independent contractors, or affiliates;
     (c) The delivery of the materials is limited to those areas of the escrow agent's physical office reserved for unrestricted public access; and
     (d) The conduct of the employees or representatives are appropriate for a business setting and do not threaten the safety or health of anyone in the escrow agent's office.
     (4) An escrow agent shall not require a consumer, as a condition of providing real estate settlement services, to obtain title insurance from a title insurance agent in which the escrow agent has a financial interest.

NEW SECTION.  Sec. 12   A new section is added to chapter 19.146 RCW to read as follows:
     (1) A mortgage broker, loan originator, officer or employee of any mortgage broker, or person who has a financial interest in a mortgage broker shall not, directly or indirectly, give any fee, kickback, payment, or other thing of value to any person as an inducement, reward for placing business, referring business, or causing title insurance business to be given to a title insurance agent in which the mortgage broker, loan originator, or person having a financial interest in the mortgage broker also has a financial interest.
     (2) A mortgage broker, loan originator, or person who has a financial interest in a mortgage broker shall not either solicit or accept, or both, anything of value from: A title insurance company, a title insurance agent, or the employees or representatives of a title insurance company or title insurance agent, that a title insurance company or title insurance agent is not permitted by law or rule to give to the mortgage broker, loan originator, or person who has a financial interest in the mortgage broker.
     (3) A mortgage broker, loan originator, or person who has a financial interest in a mortgage broker shall not prevent or deter a title insurance company, title insurance agent, or their employees or representatives from delivering to a mortgage broker or loan originator or its employees, independent contractors, and clients printed promotional material concerning only title insurance services as long as:
     (a) The material is business appropriate and is not misleading or false;
     (b) The material does not malign the mortgage broker or loan originator, its employees, independent contractors, or affiliates;
     (c) The delivery of the materials is limited to those areas of the mortgage broker or loan originator's physical office reserved for unrestricted public access; and
     (d) The conduct of the employees or representatives is appropriate for a business setting and does not threaten the safety or health of anyone in the mortgage broker's or loan originator's office.
     (4) A mortgage broker or loan originator shall not require a consumer, as a condition of providing loans or real estate settlement services, to obtain title insurance from a title insurance agent in which the mortgage broker or loan originator has a financial interest.

NEW SECTION.  Sec. 13   A new section is added to chapter 48.29 RCW to read as follows:
     (1) Section 3, 10, 11, or 12 of this act does not make unlawful the payment by a title insurer or title insurance agent and the receipt by a producer of title insurance business of a return on ownership interest in the title insurer or title insurance agent.
     (2) A return on ownership interest may include:
     (a) Bona fide dividends, and capital or equity distributions, related to ownership interest or franchise relationship, between entities in an affiliated relationship; and
     (b) Bona fide business loans, advances, and capital or equity contributions between entities in an affiliate relationship (in any direction), so long as they are for ordinary business purposes and are not fees for the referral of settlement service business or unearned fees.
     (3) A return on ownership interest does not include:
     (a) Any payment which has a basis of calculation of no apparent business motive other than distinguishing among recipients of payments on the basis of the amount of their actual, estimated, or anticipated referrals;
     (b) Any payment which varies according to the relative amount of referrals by the different recipients of similar payments; or
     (c) A payment based on an ownership, partnership, or joint venture share which has been adjusted on the basis of previous relative referrals by recipients of similar payments.

NEW SECTION.  Sec. 14   If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

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