New York title insurers can get back to schmoozing.
In a major victory for agents, closers and underwriters, a judge on Thursday annulled the strict anti-marketing regulations enacted earlier this year by the Department of Financial Services. The rules had been an attempt to crack down on excessive wining and dining in the industry, but insurance companies and their representatives called it a death knell to their business.
In a 15-page decision, Judge Eileen Rakower sided with the industry and challenged DFS’ use of a state insurance law to prevent companies from engaging in ordinary marketing activities.
According to Rakower, the law was intended to prevent kickbacks and commission rebates. It was not, she wrote, “intended to prohibit ordinary marketing and entertainment expenses.” To construe the law otherwise, she added, would be “to hold that the Legislature intended to prohibit title insurance corporations from marketing themselves for business — an absurd proposition.”
In a statement, DFS Superintendent Maria Vullo said the agency would appeal. The regulations provide “a necessary supervisory tool to ensure appropriate market conduct and to protect New York consumers,” she said.
DFS rolled out the new regulations in January, banning title companies from treating clients to meals and entertainment.
But in February, the New York State Land Title Association, along with Great American Title Agency Inc. and Venture Title Agency, filed an Article 78 petition to challenge the rules.
In court documents, they challenged the DFS’ authority and said the regulations would “wreak havoc” on title companies. “DFS must be stopped,” they wrote.
In addition to anti-marketing provisions, the regulations also banned tipping for title closers, independent contractors who attend closings and ensure all documents and checks are in order.
“We are pleased with the court’s decision and thankful that title closers can now return to a situation where their means of making a living is not in jeopardy,” said Eric Horowitz, an attorney with Zane and Rudofsky who filed an amicus brief on behalf of title closers in March. NYSLTA declined to comment.
Over the past few months, the state Senate has passed bills easing the regulations and allowing title companies to continue buying clients coffee and taking them to lunch. In Thursday’s decision, Rakower said if DFS wants to regulate marketing and entertainment expenses, the Legislature may pass new regulation.
“Indeed, the Legislature is in the best position to balance any social and economic ramifications purportedly created by certain practices in the title insurance industry,” she said.