COMMITTEE SUBSTITUTE

FOR

H. B. 4536

(By Delegates Phillips, P. White, Vest

Gallagher, Houvouras, Douglas and Manuel)

(Originating in the House Committee

on Banking and Insurance)


[February 23, 1994]

A BILL to amend and reenact section two, article eight-c, chapter thirty-one-a of the code of West Virginia, one thousand nine hundred thirty-one, as amended; and to amend chapter thirty-three of said code by adding thereto a new article, designated article forty-one, all relating to title insurance; authorizing banking institutions or banks to engage in the business of title insurance; defining terms; authorizing title insurers; duties and services of agents and insurers; title examinations; maintenance of records; prohibited practices; penalties; premium charges and limitations; rate schedules; requisite filings; administrative procedures; approval of forms; premium taxes; promulgation of rules and examinations.
Be it enacted by the Legislature of West Virginia:

That section two, article eight-c, chapter thirty-one-a of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended and reenacted; and that chapter thirty-three of said code be amended by adding thereto a new article, designated article forty-one, all to read as follows:
 CHAPTER 31A. BANKS AND BANKING.
ARTICLE 8C. PROVISION OF FINANCIALLY-RELATED SERVICES BY BANKS AND BANK HOLDING COMPANIES.

§ 31A-8C-2. Financially-related defined.

The term "financially-related" includes:
(a) All products, services and activities offered or engaged in by national banks or by any West Virginia state or federally chartered thrift institution or credit union; except those excluded by subsection (f)(g) of this section;
(b) Equity investments in real estate development activities, products and services;
(c) Securities underwriting and brokerage activities, products and services; except those excluded by subsection (f) of this section;
(d) Financial consulting activities, products and services;
(e) Title insurance;
(e)(f) Any and all other activities, products and services engaged in or offered by other providers of financial products or services which may be deemed by the commissioner of banking to be financially-related; except those excluded by subsections (f)(g) and (g)(h) of this section.
(f)(g) Except as provided in subsection (e) herein, the term "financially-related" excludes products, services or activities offered or engaged in by any insurer or by any underwriter, agent, solicitor or broker of insurance, which products, services or activities are regulated by the department of insurance pursuant to chapter thirty-three of the West Virginia code: Provided, That the term "financially-related" shall include except for such activities, products and services permitted, engaged in or offered by a West Virginia state chartered banking institution prior to the effective date of this article.
(g)(h) The term "financially-related" also excludes products, services or activities offered or engaged in by any real estate agent, agency or broker, which products, services or activities are regulated by the state real estate commission pursuant to chapter forty-seven of the West Virginia code: Provided, That the term "financially-related" shall include except for such activities, products and services permitted, engaged in or offered by a West Virginia state chartered banking institution prior to the effective date of this article or permitted pursuant to subdivision (b) of this section.
 CHAPTER 33. INSURANCE.
 ARTICLE 41. TITLE INSURANCE.
 § 33-41-1. Applicability of law.
(a) The provisions of this article shall apply to all persons engaged in the business of title insurance in this state.
(b) Except as otherwise expressly provided herein, all provisions of the insurance laws of this state applying to insurance and insurance companies generally shall apply to title insurance and title insurance companies.
(c) Nothing contained in this article shall be construed to authorize the practice of law by any person who is not duly licensed and admitted to practice law in this state, nor shall it be construed to authorize the commissioner of insurance to regulate the practice of law or the sale of real estate.
 § 33-41-2. Definitions.
For purposes of this article, the following definitions shall apply:
(a) "Alien title insurer" means any title insurer incorporated or organized under the laws of any foreign nation or any province or territory thereof.
(b) "Approved attorney" means an attorney at law who is not an agent or employee of a title insurer, and whose certification of title a title insurer is willing to accept as the basis for issuance of a title insurance policy.
(c) "Charge" means any fee billed by a title agent, agency or title insurer for the performance of services other than fees that fall within the definition of premium in this section, and includes, but is not limited to, fees for document preparation, fees for the handling of escrows, settlements or closings, and fees for services commenced but not completed: Provided, That the term "charge" does not include fees collected by a title insurer, title agency or title agent in an escrow, settlement or closing when the fees are limited to the amount billed for services rendered by an entity independent of the title insurer, title agent or agency.
(d) "Commissioner" means the insurance commissioner of West Virginia.
(e) "Controlled business" means any portion of the business of a title insurer, title agency or title agent conducted in this state, referred to it by any producer of title business or by any associate of such producer, where the producer of title business, the associate, or both have a financial interest in the title insurer, title agency or title agent to which a business is referred.
(f) "Domestic title insurer" means a title insurer organized under the laws of this state.
(g) "Escrow, settlement or closing fee" means the consideration for supervising the actual execution, delivery or recording of transfer and lien documents and for disbursing funds.
(h) "Financial interest" means any interest, legal or beneficial, that entitles the holder directly or indirectly to one percent or more of the net profits or net worth of the entity in which the interest is held, but does not include payments of principal or interest made to a mortgage holder of the title agency.
(i) "Foreign title insurer" means any title insurer organized under the laws of any other state of the United States, the District of Columbia, or any other jurisdiction of the United States.
(j) "Premium" means the risk rates charged to the insured.
(k) "Producer of title business" or "producer" means any person, including any officer, director or owner of five percent or more of the equity or capital of any person, who is engaged in this state in the trade, business, occupation or profession of:
(1) Buying or selling interests in real property;
(2) Making loans secured by interests in real property; or
(3) Acting as broker, agent, representative or attorney of a person who buys or sells any interest in real property or who lends or borrows money with such interest as security.
(l) "Single risk" means the insured amount of any title insurance policy: Provided, That where two or more title insurance policies are issued simultaneously covering different estates in the same real property, "single risk" means the sum of the insured amounts of all such title insurance policies: Provided, however, That any title insurance policy insuring a mortgage interest, a payment under which reduces the insured amount of a fee or leasehold title insurance policy, shall be excluded in computing the amount of a single risk to the extent that the insured amount of the mortgage title insurance policy does not exceed the insured amount of the fee or leasehold title insurance policy.
(m) "Title agent" or "title insurance agent" means any authorized agent of a title insurer or representative of the title agent or agency who acts as a title agent in the solicitation of, negotiation for or procurement or making of any title insurance contract: Provided, That the following persons are not to be considered as title agents or title insurance agents:
(1) Approved attorneys;
(2) Salaried officers or employees of title insurers, title agents or title insurance agencies who do not establish premiums for policies of title insurance, determine insurability, or issue commitments, policies or other contracts of title insurance.
(n) "Title insurance agency" or "agency" means any individual transacting or doing business under any name other than his true name, or any partnership, unincorporated association, corporation, bank or banking institution transacting or doing business with the public or title insurance companies as a title insurance agent.
(o) "Title insurance business" means:
(1) Issuing as insurer or offering to issue as insurer a title insurance policy;
(2) Transacting or proposing to transact by a title insurer, title agency, or title agent any of the following activities when conducted or performed by a title agent, title agency or title insurer in conjunction with the issuance of its title insurance:
(A) Soliciting or negotiating the issuance of a title insurance policy;
(B) Guaranteeing, warranting or otherwise insuring the correctness of title searches;
(C) Handling of escrows, settlements or closings;
(D) Execution of title insurance policies, reports, commitments, binders and endorsements;
(E) Effecting contracts of reinsurance; or
(F) Abstracting, searching or examining titles.
(3) Transacting by a title insurer, title agent or agency of matters subsequent to the issuance of a title insurance policy and arising out of it.
(p) "Title insurance policy" means a contact insuring or indemnifying against loss or damage arising from any or all of the following:
(1) Defects in or liens or encumbrances on the insured title;
(2) Unmarketability of the insured title; or
(3) Invalidity or unenforceability of liens or encumbrances on the stated property: Provided, That "title insurance policy" does not include a preliminary report, binder, commitment or abstract.
(q) "Title insurer" means any insurance company licensed in this state engaged in the business of title insurance as an insurer.
 § 33-41-3. Authorized insurers; services allowed.
(a) No person other than a domestic, foreign or alien title insurer duly licensed by the commissioner of this state shall transact title insurance business as an insurer in this state.
(b) Each title insurer may engage in the title insurance business in this state if licensed to do so by the commissioner and may provide any other service related or incidental to the sale and transfer or financing of property.
§ 33-41-4. Insurer's duties; policies; title examinations; determination of insurability; liens; records to be maintained.

(a) No title insurance policy shall be written unless and until the title insurer, title agent or agency has:

(1) Caused a search of the title to be made from the evidence obtained from the offices of the clerk of the county commission where the property is located;
(2) Caused to be made a determination of insurability of title in accordance with sound underwriting practices.
(b) Except as provided by rule promulgated by the commissioner, no title insurer, title agent or agency shall knowingly issue any owner's title insurance policy or commitment to insure without showing all outstanding, enforceable recorded liens or other interests against the title which is to be insured.
(c) 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 agent or agency for a period of not less than fifteen years after the title insurance policy has been issued.
(d) The provisions of this section shall not apply to a title insurer assuming liability through a contract of reinsurance; a title insurer acting as coinsurer if one of the other coinsuring title insurers has complied with this section; or policies of title insurance issued prior to the expiration of one year after the effective date of this article.
§ 33-41-5. Fiduciary duty of agents.

Any person who shall be appointed or who shall act as a title insurance agent or agency for any title insurance company within this state, or who shall, as title insurance agent or agency, solicit applications, delivery policies and collect premiums thereon, or who shall receive or collect moneys from any source or on any account whatsoever, as agent or agency, for a title insurance company doing business in this state, shall be held responsible in a trust or fiduciary capacity to the company for any money so collected or received by him for such company.

§ 33-41-6. Referrals; general prohibitions and conditions.

(a) No title insurer or title agent shall:

(1) Pay, directly or indirectly, to the insured or to any other person any commission, any part of its premiums, fees or other charges, or pay or receive any other consideration as inducement or compensation for the referral of title business or for performance of any escrow or other service by the title agent or agency; or
(2) Issue any title insurance policy or perform any service in connection with any transaction in which it has paid or intends to pay any commission, rebate or inducement which it knows to be in violation of this section.
(b) Nothing in this section shall be construed as prohibiting reasonable payments, other than for the referral of title insurance business, for services actually rendered to either a title insurer or a title agent or agency in connection with title insurance business.
(c) Nothing in this article shall prohibit any producer or any associate of a producer from referring title business to any title insurer or title insurance agent or agency of his choice, and if such producer or associate producer has any financial, franchise or ownership interest in the title insurer, the title insurance agent or agency, from receiving income or profits produced or realized from such financial, franchise or ownership interest so long as the purchaser is made aware in writing of the relationship between the producer or associate producer and the title agent or agency.
 § 33-41-7. Required insurers prohibited.
No producer or other person shall require, directly or indirectly, that any other person shall place any contract of title insurance of any kind through any particular title agent, agency or title insurer as a condition, agreement or understanding to sell or furnish such person any loan, or extension thereof, or any credit, sale, property, contract, lease or service. No title agent, agency or title insurer shall knowingly participate in any such prohibited plan or transaction. No person shall fix a price charged for such thing or service, or discount from or rebate upon price, on the condition, agreement or understanding that any title insurance is to be obtained through a particular agent, agency or title insurer.
 § 33-41-8. Penalties; administrative procedures.
(a) Any person who violates the provisions of this article, or any title insurer, title agent or agency who accepts an order for title insurance knowing that it is in violation of the provisions of this article, shall, in addition to any other action which may be taken by the commissioner, be subject to a fine in an amount equal to ten times the premium for the title insurance and shall have his title insurance license revoked.
(b) Any action taken by the insurance commissioner to effect the purposes of this article shall be made pursuant to the administrative procedures required by article two of this chapter.
§ 33-41-9. Limitations on premiums; discrimination prohibited; classification and review.

(a) Premiums charged by any title insurer, title agent or agency shall not be inadequate, excessive or unfairly discriminatory.

(b) Premiums are excessive if, in the aggregate, they are likely to produce a long run profit that is unreasonably high in relation to the riskiness of the business or if expenses are unreasonably high in relation to the services rendered.
(c) Premiums are inadequate if they are clearly insufficient, together with investment income attributable to them, to sustain projected losses and expenses or if continued use of such premiums will have the effect of substantially lessening competition or the effect of tending to create a monopoly.
(d) Premiums are unfairly discriminatory if the premium charged for a policy of any particular face amount of liability is higher than the premium for an identical policy within the same classification where such policy has a like face amount or a higher face amount of liability. Premiums within each premium classification may, in the discretion of the title insurer, to a reasonable degree be less than the expenses incurred and the risks assumed in the case of policies of lower face amount of liability and the excess may be charged against policies of higher face amount of liability without rendering the premiums unfairly discriminatory.
(e) Premiums may be grouped by classifications into the various types of title policies and endorsements offered. The clarifications may be further divided to produce premiums for individual risks or services within a classification. Those classifications or further divisions may be established based upon any one or more of the following:
(1) The size of a transaction and its effect upon the continuing solvency of the title insurer using the rate in question if a loss should occur;
(2) Expense elements, including management time that would ordinarily be expended in a typical transaction of a particular size;
(3) The geographic location of a transaction, including variation in risk and expense elements attributable thereto;
(4) The individual experience of the insurer and title insurance agent or agency using the rate in question ; and
(5) Any other reasonable considerations which may include but not be limited to builder/developer quantity discounts and multiple policy discounts on an individual parcel of property. Those classifications or further divisions thereof shall apply to all risks and services in the business of title insurance under the same or under substantially the same circumstances or conditions.
(f) In making or reviewing premiums due consideration shall be given to past and prospective loss experience, to exposure to loss, to underwriting practice and judgment, to past and prospective expenses, including amounts paid to or retained by title agents or agencies, to a reasonable margin for profit and contingencies taking into account the need for a reasonable return on capital committed to the enterprise, and to all other relevant factors both within and outside of this state.
 § 33-41-10. Rate schedules; filing and approval.
(a) Every title insurer licensed to to business in this state shall file with the commissioner its premium schedules it proposes to use in this state. Every filing shall set forth its effective date, which shall not be earlier than the thirtieth day following its receipt by the commissioner, and shall indicate the character and extent of the coverages and services contemplated. Filings that the commissioner has not disapproved within sixty days of filing shall be deemed effective.
(b) No title insurer or title agent or agency licensed to to business in this state may use or collect any premium after the first day of September, one thousand nine hundred ninety-four, except in accordance with the premium schedules filed with the commissioner as required by this section. The commissioner may provide by rule for interim use of premium schedules in effect prior to the such date.
(c) Every title insurer shall establish basis classifications of coverages to be used as the basis for determining premiums.
 § 33-41-11. Rate administration.
In order to further uniform administration of rate regulation, the commissioner and every title insurer, title agent, or agency in this state may exchange information and experience data with insurance supervisory officials of this and other states and rating organizations in other states and may consult with them with respect to such information and data.
§ 33-41-12. Premium charges; effective date; filings with the commissioner.

(a) No title insurer, title agent or agency shall use any premium in the business of title insurance prior to its effective date nor prior to the filing with respect to such premium having been publicly displayed and made readily available to the public for a period of not less than thirty days in each office of the title insurer, title agent, or agency in the county to which such rates apply, and no premium increase shall apply to title policies which have been contracted for prior to such effective date.

(b) Premium charges in excess of those set forth in a premium filing which has become effective may be made when such filing includes a statement that such premiums may be made in the event unusual insurance risks are assumed or unusual services performed in the transaction of the business of title insurance: Provided, That such premiums are reasonably commensurate with the risks assumed for the costs of the services performed.
(c) Copies of schedules of premiums showing their effective date or dates shall be filed with the commissioner annually on or before March first and shall be kept at all times available to the public and prominently displayed in a public place in each office of a title insurer, title agent or agency in the county to which such rates apply while such rates are in effect.
§ 33-41-13. Filing of policy forms; approval by the commissioner; grounds for disapproval.

(a) No title insurance policy form, certificate, application, rider, endorsement or other form shall be delivered or issued for delivery in this state by a title insurer unless it has been filed with and approved by the commissioner. Every title insurer licensed to do business in this state shall file with the commissioner copies of all forms it proposes to use in this state, including, but not limited to, the following:

(1) Title insurance policies;
(2) Standard form endorsements; and
(3) Preliminary reports, commitments, binders or other reports issued prior to the issuance of a title insurance policy.
(b) Every such filing shall be made not less than sixty days in advance of any such delivery. At the expiration of such sixty days, the form so filed shall be deemed approved unless prior thereto it has been affirmatively approved or disapproved by the commissioner. Approval of any such form by the commissioner shall constitute a waiver of any unexpired portion of such waiting period. The commissioner may at any time, after notice and for cause shown, withdraw such approval.
(c) Any order of the commissioner disapproving any such form or withdrawing a previous approval shall state the grounds therefor.
(d) The commissioner may, by order, exempt from the requirements of this section for so long as he deems proper any insurance document or form or type thereof as specified in such order, to which, in his opinion, this section may not practicably be applied, or the filing and approval of which are, in his opinion, not desirable or necessary for the protection of the public.
(e) The commissioner shall disapprove any such form of policy, application, rider, or endorsement or withdraw any previous approval thereof for any of the following reasons:
(1) If it is in any respect in violation of or does not comply with the provisions and requirements of this chapter;
(2) If it contains or incorporates by reference any inconsistent, ambiguous, or misleading clauses, or exceptions and conditions which deceptively affect the risk purported to be assumed in the general coverage of the contract;
(3) If it has any title, heading, or other indication of its provisions which is misleading;
(4) If the purchase of such policy is being solicited by deceptive advertising;
(5) If the benefits provided therein are unreasonable in relation to the premium charged; or
(6) If the coverages provided therein are not sufficiently broad to be in the public interest.
 § 33-41-14. Commissioner to promulgate rules.
(a) The commissioner shall promulgate rules in accordance with the provisions of chapter twenty-nine-a of this code regarding the guidelines and procedures for the evaluation of premiums. Such rules may include consideration of the following:
(1) Cost of underwriting risks assumed by the insurer;
(2) Amounts paid to or retained by title agents;
(3) Operating expenses of the insurer other than underwriting and claims expense;
(4) Payment of claims and claim related expenses;
(5) Investment income;
(6) Reasonable profit;
(7) Premium taxes; and
(8) Any other factors the commissioner deems relevant.
(b) In addition to any other powers granted by this article, the commissioner may adopt rules to protect the interests of the public including, but not limited to, regulations governing sales practices, escrow, collection, settlement, closing procedures, policy coverage standards, rebates and inducements, controlled business, the approval of agency contracts, unfair trade practices and fraud, statistical plans for data collection, consumer education, any other consumer matters, the business of title insurance, or any regulations otherwise implementing or interpreting the provisions of this article.
 § 33-41-15. Examinations.
The commissioner or his duly authorized representative may at any time and from time to time, inspect and examine the records, books and accounts of any title insurer, agency or agent, and may require such periodic and special reports from any title insurer, agency or agent as may be reasonably necessary to enable the commissioner to satisfy himself that such title insurer, agency or agent is complying with the requirements of this chapter. Such examinations shall be made pursuant to the provisions of section nine, article two of this chapter.