SENATE, No. 836
STATE OF NEW JERSEY
INTRODUCED FEBRUARY 26, 1996
By Senator BUBBA
An Act concerning title insurance, amending P.L.1991, c.18, and amending and supplementing P.L.1975, c.106 and P.L.1987, c.293.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 2 of P.L.1987, c.293 (C.17:22A-2) is amended to read as follows:
2. As used in this act:
a. "Applicant" means a person who has applied for, or who intends to apply for, a license in accordance with this act.
b. "Commissioner" means the Commissioner of Insurance.
c. "Days" means calendar days.
d. "Department" means the Department of Insurance.
e. "Insurance," "insurance policy" or "insurance contract" includes contracts or policies of life insurance, health insurance, annuities, indemnity, property and casualty, fidelity, surety[,]and guaranty [and title] insurance.
f. "Insurance agent" means a person authorized, in writing, by any insurance company to act as its agent to solicit, negotiate or effect insurance contracts on its behalf or to collect insurance premiums and who may be authorized to countersign insurance policies on its behalf.
g. "Insurance broker" means a person who, for a commission, brokerage fee, or other consideration, acts or aids in any manner concerning negotiation, solicitation or effectuation of insurance contracts as the representative of an insured or prospective insured; or a person who places insurance in an insurance company that he does not represent as an agent.
h. "Insurance consultant" means a person who, for a fee, commission or other consideration, acts or holds himself out to the public or any licensee as offering any advice, counsel, opinion or service with respect to the benefits, advantages or disadvantages under any insurance policy or contract that is or could be issued in this State, but shall not include bank trust officers, attorneys-at-law and certified public accountants who negotiate contracts on behalf of others or provide general financial counsel if no commission or brokerage fee is paid for those services.
i. "Insurance company" includes any company that underwrites or issues an insurance policy or contract including fraternal benefit societies as defined in P.L.1959, c.167 (C.17:44A-1 et seq.) and risk retention groups and purchasing groups as defined in 15 U.S.C.§ 3901, but does not include title insurance companies.
j. "Insurance producer" means any person engaged in the business of an insurance agent, insurance broker or insurance consultant.
k. "License" means any license issued pursuant to the provisions of this act or any act which is superseded by this act.
l. "Licensee" means any person holding an insurance producer license issued pursuant to this act.
m. "Limited insurance representative" means a person who is authorized to solicit, negotiate or effect contracts for a particular line of insurance as an agent for an insurance company authorized to write that line in this State which by the nature of the line of business and the manner by which it is marketed to the public does not require the professional competency demanded for an insurance producer license.
n. "Organization" means any corporation, partnership or other legal entity.
o. "Person" means any individual, corporation, partnership or other legal entity.
p. "State, other than this State," includes any other state, the District of Columbia, the Commonwealth of Puerto Rico, any territory of the United States and the Provinces of Canada.
(cf: P.L.1987, c.293, s.2)
2. Section 10 of P.L.1987, c.293 (C.17:22A-10) is amended to read as follows:
10. a. No insurance producer license shall be issued unless it designates one or more of the following authorities:
(1) Life
(2) Health
(3) Property/Casualty
(4) Surplus Lines
(5) [Title Insurance] (Deleted by amendment, P.L. , c. .)
b. The commissioner shall, by rule or regulation, designate the kind or kinds of insurance that may be transacted by licensed insurance producers holding each authority.
(cf: P.L.1987, c.293, s.10)
3. (New section) Nothing contained in P.L.1987, c.293 (C.17:22A-1 et seq.) shall be construed to apply to title insurance, except as may be expressly provided in this 1996 amendatory and supplementary act. The sole authority of the commissioner to regulate title insurance shall be derived from P.L.1975, c.106 (C.17:46B-1 et seq.), except as may be expressly provided in this 1996 amendatory and supplementary act.
4. Section 1 of P.L.1975, c.106 (C.17:46B-1) is amended to read as follows:
1. Certain words defined. As used in this act:
a. "Title insurance" means insuring, guaranteeing or indemnifying owners of real property or others interested therein against loss or damage suffered by reason of liens, encumbrances upon, defects in or the unmarketability of the title to said property, guaranteeing, warranting, or otherwise insuring by a title insurance company the correctness of searches relating to the title to real property, or doing any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this act.
b. The "business of title insurance" shall be deemed to be (1) the making as insurer, guarantor or surety, or proposing to make as insurer, guarantor or surety, of any contract or policy of title insurance; (2) the transacting or proposing to transact, any phase of the title insurance, including abstracting, examination of title, solicitation, negotiation preliminary to execution of a contract of title insurance, and execution of a contract of title insurance, insuring and transacting matters subsequent to the execution of the contract and arising out of it, including reinsurance; or (3) the doing, or proposing to do, any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this act.
c. "Title insurance company" means any domestic company organized under the provisions of this act for the purpose of insuring titles to real estate, any title insurance company organized under the laws of another state or foreign government and licensed to insure titles to real estate within this State pursuant to section 25 of this act, and any domestic or foreign company having the power and authorized to insure title to real estate within this State as of the effective date of this act and which meets the requirements of this act.
d. "Applicants for insurance" shall be deemed to include all those, whether or not a prospective insured, who from time to time apply to a title insurance company, or to its agent, for title insurance, and who at the time of such application are not agents for a title insurance company.
e. "Premium" for title insurance means that portion of the fee charged by a title insurance company, agent of a title insurance company or approved attorney of a title insurance company, or any of them, to an insured or to an applicant for insurance, for the assumption by the title insurance company of the risk created by the issuance of the title insurance policy.
f. "Fee" for title insurance means and includes the premium for the assumption of the insurance risk, charges for abstracting or searching, examination, determining insurability, and every other charge, whether denominated premium or otherwise, made by any title insurance company or title insurance agent.
g. "Commissioner" means the Commissioner of Insurance of the State of New Jersey.
h. "Approved attorney" means an attorney at law admitted to practice in the State of New Jersey, who is not an employee of a title insurance company or of a title insurance agent, upon whose examination of title and report thereon a title insurance company may issue a policy of title insurance.
i. "Title insurance agent" means a person, firm, partnership, association, corporation, cooperative or joint-stock company having a bona fide office or offices within the State of New Jersey, and authorized in writing by a title insurance company to solicit insurance risks and collect fees in its behalf and who in the regular course of business as such agent shall perform all of the following functions: examine title to real estate, determine insurability in accordance with underwriting rules and standards prescribed by such title insurance company, and issue a title report, binder, or commitment to insure, and policy based upon the examination performed by such agent and determination of insurability as aforesaid. Provided, however, the term "title insurance agent" shall not include officers and salaried employees of any title insurance company authorized to do a title insurance business within this State.
j. "Single insurance risk" means the insured amount of any policy or contract of title insurance issued by a title insurance company unless two or more policies or contracts are simultaneously issued on different estates in identical real property, in which event, it means the sum of the insured amounts of all such policies or contracts. However, any such policy or contract that insures a mortgage interest that is excepted in a fee or leasehold policy or contract, and which does not exceed the insured amount of such fee or leasehold policy or contract, shall be excluded in computing the amount of a single insurance risk.
k. "Net retained liability" means the total liability retained by a title insurance company under any policy or contract of insurance, or under a single insurance risk as defined in or computed in accordance with subsection j. of this section, after the purchase of reinsurance.
l. "Foreign title insurance company" means a title insurance company organized under the laws of any other state of the United States.
m. "Alien title insurance company" means any title insurance company incorporated or organized under the laws of any foreign nation or of any province or territory thereof, not included under the definition of "foreign title insurance company."
n. "Personal or controlled insurance" means a policy of title insurance where the source or origination of the application for insurance or where the insured or one of the insureds under such policy is, or the loss thereunder is payable to:
(1) The title insurance company issuing such policy, or (a) any person or corporation directly or indirectly owning or controlling a majority of the voting stock or controlling interest in such title insurance company, or (b) any corporation which is directly or indirectly controlled by a person or corporation which also controls the title insurance company as described in paragraph (1)(a) of this subsection, or (c) any corporation making consolidated returns for United States income tax purposes with such title insurance company or any corporation described in paragraphs (1)(a) and (1)(b) of this subsection; or
(2) The title insurance agent issuing such policy, or
(a) If such title insurance agent is a natural person:
(i) his spouse, his employer or his employer's spouse; or
(ii) any person related to him or the persons mentioned in subparagraph (i) of paragraph (2)(a) of this subsection within the second degree by blood or marriage; or
(iii) if his employer is a corporation, any person directly or indirectly owning or controlling a majority of the voting stock or controlling interest in such corporation; or
(iv) if his employer is a partnership or association, any person owning an interest in such partnership or association.
(b) If such title insurance agent is a corporation,
(i) any person directly or indirectly owning or controlling a majority of the voting stock or controlling interest in such corporation; or
(ii) any corporation which is directly or indirectly controlled by a person who also controls the title insurance agent as described in subparagraph (i) of paragraph (2)(b) of this subsection; or
(iii) any corporation making consolidated returns for United States income tax purposes with any corporation described in subparagraph (i) or (ii) of paragraph (2)(b) of this subsection.
o. "Source" as used in this act means and includes clients and customers of attorneys at law and real estate brokers, where such attorney or broker acts as a title insurance agent in an individual, partnership or corporate capacity.
p. "Person" as used in this act means a firm, partnership, association, corporation, cooperative or joint-stock company as well as individuals, unless restricted by the context to an individual as distinguished from some other entity.
(cf: P.L.1990, c.131, s.1)
5. (New section) a. Every title insurance company authorized to transact business within this State shall certify annually to the commissioner the names of all title insurance agents representing it in this State. No person shall function as a title insurance agent and no title insurance company shall authorize any person to function as its agent unless that person holds a valid title insurance agent's license.
b. Any person who solicits, negotiates or effectuates a contract of title insurance insuring real property within this State shall be licensed in the manner provided by section 4 of P.L. 1987, c. 293 (C.17:22A-4), whether a partner, principal, director, shareholder, officer or employee of a title insurance agent or title insurance company. The license shall be denominated an "individual title insurance producer's license."
c. Each title insurance agent doing business in this State shall obtain an organization license in accordance with the provisions of section 6 of P.L. 1987, c. 293 (C. 17:22A-6), to be denominated a "title insurance agent's organization license." No license shall be issued to any agent which does not meet the requirements of subsection i. of section 1 of P.L. 1975, c. 106 (C.17:46B-1).
d. No person shall act as, or perform any of the functions of, or hold himself out as, a title insurance producer, or receive any payment, compensation, commission or fee in connection with same, without first having obtained an individual title insurance producer's license. No title insurance agent shall act as, or perform any of the functions of, or hold himself out as a title insurance agent, or receive any fee, payment, compensation, commission or consideration in connection with same, without having first obtained an organization license. Engaging in a single act or transaction shall be sufficient proof of a violation of this section. However, this section shall not apply to the clerical duties of office employees nor the managerial or supervisory duties of managers who do not solicit, negotiate or effectuate contracts of title insurance.
e. The commissioner shall have the powers set forth in sections 17 through 21, inclusive, of P.L.1987, c.293 (C. 17:22A-17 through 17:22A-21, inclusive) with respect to individual title insurance producer's licenses and title insurance agent's organization licenses.
f. In the event of the death or the inability further to act, of a licensed title insurance agent, where no other agent in the agency, copartnership, association or corporation is authorized to represent such insurance company, the commissioner may issue a temporary license to another person enabling that other person to represent any such insurance company, upon the filing of an appropriate application for a title insurance agent's license containing the additional information required by this section. Such temporary license shall continue only until the licensee is afforded an opportunity of taking the examination for title insurance agents and receiving the results, but not to exceed a period of six months. In the event of the failure of the applicant to qualify for a regular title insurance agent's license, no renewal or extension may be granted to any temporary license held by the applicant.
6. Section 1 of P.L. 1991, c. 18 (C. 17:46B-30.1) is amended to read as follows:
1. a. No bank, trust company, bank and trust company, savings bank, savings and loan association or other lending or financial institution, mortgage service, mortgage brokerage, mortgage banking or mortgage guaranty company, or any service company of or for any lending or financial institution, or builder, or any person licensed as a real estate broker or salesperson, or any officer, partner, principal or employee of any of the foregoing, shall be licensed as or permitted to act as an insurance producer or agent for a title insurance company.
b. No bank, trust company, bank and trust company, savings bank, savings and loan association or other lending or financial institution, mortgage service, mortgage brokerage, mortgage banking or mortgage guaranty company, or any service company of or for any lending or financial institution, or builder, or any person licensed as a real estate broker or salesperson, or any officer, partner, principal or employee of any of the foregoing, shall make the selection of a particular title insurance company [or insurance] , producer or agent a condition precedent to the granting of any mortgage loan.
c. For the purposes of this section, "builder" means any person engaged in the construction of new homes.
(cf: P.L.1991, c.18, s.1)
7. (New section) a. Every title insurance agent shall keep its books of account and records and vouchers pertaining to the business of title insurance in a bona fide office in this State in a manner that the commissioner, or his authorized representatives, may readily ascertain from time to time whether the agent has complied with all the provisions of P.L. 1975, c. 106 (C. 17:46B-1 et seq.).
b. Every title insurance agent shall maintain a separate record of all receipts and disbursements as a depository for funds and shall not commingle any such funds with an agent's own funds or with funds held by an agent in any other capacity.
c. If at any time the commissioner shall determine that an agent has failed to comply with any of the provisions of this section, the commissioner may direct that the agent cease writing new insurance until these provisions are complied with.
8. (New section) Every title insurance agent shall reply, in writing, promptly, with a copy thereof to each title insurance company for which that agent is acting, to any inquiry of the commissioner relative to the business of title insurance. A copy of any inquiry sent by the commissioner to any agent relative to that agent's conduct of the business of title insurance shall also be sent by the commissioner to each title insurance company for which that agent is acting.
9. (New section) After the effective date of this 1996 amendatory and supplementary act, no agent for a title insurance company shall adopt a firm name containing the words "title," "title company," "title insurance company," "guaranty," "guarantee," "guaranty company," or "guarantee company" or similar combination thereof; except that the word "title" may be used in combination with the words "agent" or "agency" in letters of the same size and character.
10. Section 34 of P.L.1975, c.106 (C.17:46B-34) is amended to read as follows:
34. Commissions; no right to pay. a. [No] Notwithstanding any provision of law to the contrary, no title insurance company and no title insurance agent or producer shall pay, allow or give, or offer to pay, allow or give, directly or indirectly, any commission or part of its fee or charge or any other consideration as an inducement or compensation for the placing or procuring of any order for title insurance; provided, however, that nothing herein contained shall be construed to prohibit the payment of a commission or other compensation to a [regular full-time] bona fide partner, principal, director, officer or employee of a title insurance company or agent of a title insurance company as part of the regular compensation of such employee or agent.
b. Notwithstanding any provision of law to the contrary, no person shall be permitted to solicit, negotiate or effectuate a title insurance policy, or to receive any fee, commission, compensation, consideration or payment for same, whether directly or indirectly, unless he is: a partner, principal, director, shareholder or officer of an entity which is a title insurance company or title insurance agent or a bona fide employee of a title insurance company or title insurance agent.
c. For the purposes of this section, "bona fide employee" means one who is regularly on the payroll of the entity employing him and whose job duties are performed under the supervision or control of the employing entity. No more than 25 percent of the business originated or controlled by a bona fide employee shall be personal or controlled insurance, as defined in subsection n. of section 1 of P.L.1975, c.106 (C.17:46B-1) and section 39 of P.L.1975, c.106 (C.17:46B-39).
(cf: P.L.1975, c.106, s.34)
11. Section 39 P.L.1975, c.106 (C.17:46B-39) is amended to read as follows:
39. Personal or controlled insurance. a. If the rates and charges for personal or controlled insurance from any one source so issued in any 1 calendar year received by a title insurance company or by a title insurance agent shall exceed 25%, or from all such sources shall exceed 50% of the total rates and charges received by such title insurance company or by such title insurance agent for title insurance issued in the same year, the excess shall be deemed to be unlawful rebate.
b. Each title insurance company, title insurance agent and person, entity or organization holding an insurance producer license for the line of title insurance shall, not later than the first day of April of each calendar year, file or cause to be filed with the commissioner, a Controlled Business Statement, setting forth the source of any personal or controlled insurance, as defined in this section and subsection n. of section 1 of P.L.1975, c.106 (C.17:46B-1), for the preceding calendar year, and certifying that the entity or individual filing the form is not in violation of the provisions of this section.
c. The Controlled Business Statement required by subsection b. of this section shall be made in a form and in a manner to be prescribed by the commissioner. It shall be signed, in the case of an individual, by the licensee, or, in the case of a corporation or partnership entity, by an officer or general partner, as the case may be, having actual knowledge of the entity's business affairs, and shall be verified under oath.
d. Any person or entity required to file a Controlled Business Statement who or which shall fail to do so in a timely fashion, or shall fail to properly complete, execute or verify the Controlled Business Statement, shall be subject to fines or other penalties to be prescribed and imposed by the commissioner. If it shall appear that a person or entity shall have wilfully violated the provisions of this section, whether by failing or refusing to file the Controlled Business Statement in a timely fashion, or by conducting business in violation of this section, or otherwise, the commissioner shall, in addition to any fines or penalties which may be imposed by law, revoke the license of that person or entity to transact title insurance business in this State.
(cf: P.L.1975, c.106, s.39)
12. (New section) The commissioner may promulgate rules and regulations which are consistent with this 1996 amendatory and supplementary act and are necessary to implement the provisions thereof.
13. This act shall take effect immediately.
STATEMENT
The purpose of this bill is to restore the licensing and regulation of title insurance agents under the provisions of "The Title Insurance Act of 1974," P.L.1975, c.106 (C.17:46B-1 et seq.). There are a number of issues unique to title insurance which have not been adequately addressed by the "New Jersey Insurance Producer Licensing Act," P.L.1987, c.293 (C.17:22A-1 et seq.), which currently provides for the licensing and regulation of these agents. Also, there are provisions of the "New Jersey Insurance Producer Licensing Act" and the regulations adopted thereunder which conflict with the provisions of "The Title Insurance Act of 1974." This bill will rectify these areas of incompatibility, while retaining the basic licensing procedures established under the "New Jersey Insurance Producer Licensing Act." This bill also makes it clear that the Commissioner of Insurance has full authority to promulgate regulations applicable to title insurance.
Modifies the regulation of title insurance agents.