2020 ILTA Market Conduct Legislation

Requests have been made for "splits" to be 85/15 rather than 80/20 from the legislative proposal last year. On page 34, line 10 through page 35, line 12, the amendment language reflects a legislative proposal for 85/15 residential premium and endorsement splits and 80/20 for commercial premium and endorsement splits.

An important aspect in the responsibilities and liabilities of title agents is the core title services being undertaken, which are referenced in these legislative split provisions. On page 8, lines 17-20, the definition of core title services is provided in the amendment language consistent with the split provisions in last year's legislation, which are ultimately intended to reflect definitional language in subsection 3(3) of this Act, the 2005 IDFPR Bulletin (see last two paragraphs on page 2), and federal law (see 12 CFR Part 1024 Illustration No. 4 Comments)

Last year, concerns were raised regarding what was being legislatively authorized and required for compensation related to support services to a title agent. On page 35, lines 13-20, and page 38, line 4 through page 39, line 3, the amendment language attempts to clean up the support service compensation provisions from last year in a manner consistent with current state and federal law, but also with some compromise from the language last year:

• The amendment language attempts to clarify intentions to codify "commensurate" compensation requirements from the administrative rules, while also requiring documentation of support services;
• The amendment language removes a phrase from last year's legislation that created concerns regarding what "cannot be added on to the charges to the [consumer]," and instead utilizes language consistent with federal law prohibition on "duplicative" charges;
• The amendment language does keep a $350 minimum for non-search support services (i.e. not applicable to support services for searches), but clarifies that this is a "cumulative total amount" threshold and conditions the requirement for payment of all support services on whether the transaction closes (note: this subsection 21(a)(5.8) is applicable only if a title agent entity does not fulfill all of the title services themselves)

Consideration of title agent interests in a rating organization/bureau were proposed regarding last year's legislation. Similar to the organization formation documents of the rating bureau being formed in Washington state, an affiliate, non-voting membership status is explicitly authorized in this amendment language on page 22, lines 13-16 and page 28, lines 12-15.

When rates are being formed for purposes of filing/approval, there is also new language explicitly requiring the consideration of a title agent's expenses and profits, see page 23, lines 4-11 (last year, the language referenced only the title underwriter's expenses and profits).

Under a rate regulation structure, title agents capable of handling more complicated transactions raised concerns regarding whether compensation for such work would be accomodated in a rate regulation structure. On page 21, lines 1-13, the opening paragraph of the rate regulation section mandates file and approval for rates/fees "intended to be charged to the parties to a transaction," and explicitly authorizes rates/fees for "additional or special charges." This is intended to authorize additional work charges and provide flexibility in the filings.

Although the private entity rate filings in rate regulation states are not as readily available, the publicly filed rates in rating bureau states are more easily available, so below are some examples of how additional/special work charges are handled in other states from their "rate filing manuals":

Pennsylvania Rating Manual (click here) Sections 2.3 and 2.4

Section 2.3 Additional Work Charges

Insurer may impose additional Charges in especially difficult title matters. Insurer may impose additional Charges for examination of title which may involve multiple chains of title, land under water, coal, oil, gas or mineral searches, railroad property searches, land in beds of streets, rights-of-way, driveways, foreclosures, tax sales, proceedings under federal bankruptcy or state insolvency related statutes, or which involve other unusual difficulties or unusual expenditures. There shall be a reasonable relationship between the services performed, expenses incurred and the amount charged by the Insurer or Agent.

These Charges will be filed with the Department each quarter by Insurer. Agents are responsible for the filing of this information with Insurer for inclusion in Insurer's quarterly report which will report on Charges collected both by Insurer and by the Agent under this Section of the Manual.

Section 2.4 Charges for Additional Coverages:

Nothing herein shall prohibit Insurer from charging an additional special fee for affirmative risk coverage(s) not contained in this Manual. These fees will be filed with the Department each quarter by Insurer. Agents are responsible for the filing of this information with Insurer for inclusion in the Insurer's quarterly report which will report on Charges collected both by Insurer and the Agent under this Section.

New Jersey Rating Manual (click here) Section 3.1.5

Section 3.1.5 Right to Impose Special Charges

(a) The Underwriting Rates for title insurance contained in the underwriting schedules in this Rate Manual apply to the usual or standard title insurance matter, one not involving special risks or unusual hazards. When an Insurer is requested to insure a title involving special risks or unusual hazards, such insurance may be issued upon payment of such additional charges as the Insurer believes are commensurate with the undertaking.

(b) The examination charges set forth in this Rate Manual contemplate the normal or ordinary examination of title, one not requiring extraordinary time and/or expertise. When the Insurer or Title Insurance Agent is requested to conduct an examination which requires extraordinary time and/or expertise, the said Insurer reserves the right to impose additional examination charges commensurate with the work involved.

(c) The closing or settlement charges set forth in this manual contemplate the normal or usual settlement, one not involving an unusually complex closing or settlement, or, in the case of a settlement with disbursements, an unusually large number of disbursement checks or wire transfers or documents to be recorded. When the Insurer or Title Insurance Agent is asked to attend or conduct an unusually complex closing or settlement, the Insurer or Title Insurance Agent may impose an additional charge commensurate with the time and effort involved.

Ohio Rating Manual (click here) Section 12

Section 12 Supplemental Charges and Forms

(SC-1) Minimum Charges - The charges set forth herein are minimum charges. Additional charges will be made when unusual conditions of title are encountered, or when special circumstances are involved. In the event such charges are made, agreement thereto will be obtained from each person or entity obligated to pay all or any part of such charges in writing in advance.

(SC-2) Unique Title Requirements - Title insurance coverage may be required in some cases and under conditions for which no rating structure has been specially provided in this Schedule. In any such event, a charge shall be made which, in the opinion of the insurer, appears to be consistent with its general pricing procedures, as set forth herein.

The list of other rate manuals can be found toward the bottom of the "Rate Regulation Considerations" section of ILTA's market conduct resource page.

For reference, subsections 21(a)(5.3) through (5.24) of the legislation (page 37, line 6 through page 42, line 15) codify Illinois Administrative Rule provisions 50 Ill.Adm.Cd. 8100.2402(b)(1)-(22) to be applicable to all property transactions under the Act, and subsection 21(a-1) of the legislation (page 44, line 14 through page 46, line 11) codifies Illinois Administrative Rule provisions 50 Ill.Adm.Cd. 8100.2402(c)(1)-(4) and 50 Ill.Adm.Cd. 8100.2402(d)(1)-(4) to be applicable to all property transactions under the Act.

Where modifications were made in the amendment language:

• Subsection 21(a)(5.8) begins with language from 50 Ill.Adm.Cd. 8100.2402(b)(6) regarding requirements to charge for services, and adds paragraphs (A) and (B) to subsection 21(a)(5.8) regarding requirements to pay for services, which is detailed further in the "Compensation for Support Services" section above
• Subsection 21(a)(5.10) consolidates consideration of closing protection letters that were previously necessary to add to administrative rules at 50 Ill.Adm.Cd. 8100.2402(b)(8) & (c)(3)
• Subsection 21(a-1)(7) provides a time frame and monetary parameters for business entertainment safe harbors being codified from 50 Ill.Adm.Cd. 8100.2402(d)(4)

There was also some apprehension last year regarding the level of potential penalties allowed in the legislation, such as expanding what may be a class A misdemeanor, but the amendment language this year does not include that expansion (i.e. violations of Section 21 are a fineable business offense, which is the current penalty level)