GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1993

S	1 

SENATE BILL 1115

Short Title:  Title Insurance.	(Public)
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Sponsors: Senator Sands.
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Referred to:  Insurance.
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May 11, 1993

A BILL TO BE ENTITLED
AN ACT CREATING ARTICLE 27A OF THE INSURANCE LAWS RELATING TO TITLE INSURANCE TO CLARIFY AND STRENGTHEN THE PROHIBITIONS AGAINST KICKBACKS, REBATES, AND CONTROLLED BUSINESS AND DENOMINATING THESE PRACTICES AS UNFAIR METHODS OF COMPETITION.
The General Assembly of North Carolina enacts:
Section 1. Chapter 58 of the General Statutes is amended by adding a new Article to read:
"ARTICLE 27A.
"Title Insurance.
"§ 58-27A-1.  Definitions.
As used in this Article, the following definitions apply:
(1)	'Associate' means any:
a.	Business organized for profit in which a producer of title business is a director, officer, partner, employer, or owner of one percent (1%) or more of the equity capital or issued shares thereof;
b.	Employer of a producer of title business;
c.	Person, other than a natural person, that controls, is controlled by, or is under common control with, a producer of title business;
d.	Person with whom a producer of title business or any associate of that producer has any arrangement, agreement, or understanding or pursues any course of conduct, the purpose or substantial effect of which is to evade the provisions of this Article.
(2)	'Controlled business' means any portion of a title insurer's or title agent's business of title insurance in this State, referred to it by any producer of title business or an associate of that producer where the producer of title business, the associate, or both, have a financial interest in the title insurer or title agent to which business is referred.
(3)	'Financial interest' means any interest, legal or beneficial, that entitles the holder, directly or indirectly, to one percent (1%) or more of the net profits or net worth of the entity in which the interest is paid.
(4)	'Gross operating revenue' means all premiums received by a title insurer or title insurance agent.
(5)	'Person' means any natural person, partnership, association, cooperative, corporation, trust, or other legal entity.
(6)	'Premium' means fees for:
a.	Issuing a title insurance policy, including any service charge for the issuance of a title insurance policy;
b.	Preparing or issuing preliminary reports, property profiles, commitments, binders, or the like; or
c.	Assuming liability under a contract of reinsurance.
(7)	'Producer of title business' or 'producer' means any person, including any officer, director, or owner of five percent (5%) or more of the equity or capital of any person or entity engaged in this State in the business, trade, occupation, or profession of:
a.	Buying or selling of interests in real property;
b.	Making loans secured by interests in real property; or
c.	Acting as broker, agent, or representative of a person who buys or sells any interest in real property or who borrows money with that interest as security.
(8)	'Title insurance agent' means any person duly licensed pursuant to G.S. 58-33-25 and designated in writing by a title insurer to:
a.	Solicit title insurance business;
b.	Collect premiums;
c.	Determine insurability in accordance with underwriting rules and standards prescribed by the title insurance business; or
d.	Issue policies of the title insurer.
		The term 'title insurance agent' does not include approved attorneys, officers, or employees of a title insurer.
(9)	'Title insurance business' means:
a.	Issuing as insurer or offering to issue as title insurer a title insurance policy, binders, and endorsements;
b.	Soliciting or negotiating the issuance of a title policy, binder, or endorsement;
c.	Passing upon and making title insurance underwriting decisions on title risks;
d.	Guaranteeing, warranting, or otherwise insuring the title to real property;
e.	Executing policies of title insurance;
f.	Effecting contracts of reinsurance on real property titles; or
g.	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 Article.
"§ 58-27A-5.  Prohibitions against kickbacks, rebates, and controlled business.
(a)	No person, title insurance agent, agency, lender, or other entity shall:
(1)	Pay directly or indirectly, or receive any part of its premium or fees or any other consideration as inducements or compensation for the referral of title business; or
(2)	Issue any title 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, or reasonably should know, is in violation of this Article.
(b)	No insurer named in a title insurance policy, no producer of title business, no associate of a producer, nor any other person may knowingly receive or accept, directly or indirectly, any commission, rebate, or inducement referred to in subsection (a) of this section.
(c)	No title insurer or title agency may accept an order for title insurance business, issue a title insurance policy or binder, or receive or retain any premium or fee in connection with any transaction if:
(1)	The title insurer knows or reasonably should know that the transaction will constitute controlled business for that title insurer or title agent; and
(2)	Twenty percent (20%) or more of the gross operating revenue of that title insurer or title agent in the calendar year in which the transaction takes place is derived from controlled business.
Provided further, every licensed title insurance agent applying for the renewal of his or her title insurance license shall certify to the Department of Insurance, upon an application form provided by the Department of Insurance, that no more than twenty percent (20%) of gross premiums written in the preceding year by that agent was written for controlled business risks.  In computing premiums for the purpose of this subsection, a simultaneously issued policy issued for a single premium shall be treated as a single issuance of a title insurance policy.
(d)	No producer of title insurance, associate, or lender engaged in lending money on the security of real property shall employ or use any method or business practice, directly or indirectly, which specifies or designates any particular title insurer or indicates that the producer, associate, or lender favors a particular title insurer.  Provided, once the borrower has indicated the title insurer selected, the lender may disapprove the insurer on a nondiscriminatory basis related to the solvency of the insurer.
"§ 58-27A-10.  Violation of this Article deemed unfair trade practices.
The violation of any of the provisions of this Article is an unfair method of competition and an unfair trade practice within the meaning of Article 63 of this Chapter, and Article 1 of Chapter 75 of the General Statutes."
Sec. 2.  Nothing in this act shall be construed to repeal or modify the provisions of G.S. 75-17, which shall remain in full force and effect.
Sec. 3.  This act is effective upon ratification.