The February 28, 2014 Advisory and April 3, 2014 Memorandum, including the Data Call included therewith, issued by the Idaho Department of Insurance (“Department”) are hereby rescinded and are of no further force or effect as of the date of this Advisory.
Regarding the issuance of a title commitment and related cancellation fees, the Department reminds all title agents of the following rules and provides the Department’s position on how the Department will apply them.
IDAPA 18.01.25.004.02.d states that no title insurance agent shall “issue a title insurance binder, commitment or preliminary report without an order and without making a charge therefor if a policy is not issued thereon….” IDAPA 18.01.39.10.04 and 18.01.56.010.05 define uncollected cancellation fees for title commitments as “things of value.” IDAPA 18.01.56.11 states that providing things of value such as uncollected cancellation fees to a customer is considered an illegal inducement.
IDAPA 18.01.56, EXHIBIT 1.9 states that “[a] title entity shall not waive a cancellation fee, fail to charge for a cancellation fee, or otherwise fail to make efforts to collect a cancellation fee from the recipient of services provided by the title entity.” When a title commitment issued by a title agent in response to an order does not result in a policy of title insurance, the title agent must 1) charge a cancellation fee in the amount required by the rules or otherwise make an effort to actually collect the cancellation fee; and 2) not waive the cancellation fee. The Department construes the requirement to charge or otherwise make an effort to collect a cancellation fee to include a reasonableness and consistency standard. Hence, failure to collect a cancellation fee, in and of itself, is not indicative of providing an illegal inducement. However, the efforts to collect cancellation fees must be both reasonable and consistent between an agent’s customers. For example, a title agent must provide the customer with at least one written invoice for the cancellation fee. However, a title agency sending multiple invoices to an individual, but only one invoice to a financial institution could demonstrate an inconsistency that may constitute an illegal inducement. Hence an agent may not stop with one invoice for a favored customer while sending multiple invoices or selling another customer’s bill to a collection agency.
During the course of the five (5) year agency examination pursuant to Idaho Code § 41-2710(7), or an investigation of an inquiry or complaint concerning compliance with Idaho Insurance Code and related rules, the Department will look at the specific agency’s procedures, processes, and practices regarding the issuing of title commitments and the charge for and efforts to collect title commitment cancellation fees. The agency procedures and processes should indicate how the agency accepts an order for title commitment, who it identifies as the applicant for the order and what person or recipient of services is responsible for the cancellation fees in the event the order does not result in a title policy. The examiner will examine individual title commitments issued and subsequently cancelled to determine if the agency’s procedures and processes concerning the charge for and efforts to collect title commitment cancellation fees have been applied in a fair, consistent and equitable manner. The examiner will look for evidence that the agency issuing title commitments is not subsequently waiving the cancellation fee or failing to make a reasonable effort to collect the cancellation fees.
If the Department determines that an agency’s practices demonstrate a failure to charge for or make an effort to collect title commitment cancellation fees, or show waiver of cancellation fees, such practices may be considered illegal inducements and the agency may be referred to the Department’s legal counsel for appropriate administrative action.
Please feel free to contact me with any questions you might have.
Examiner Title & Market Insurance Specialist