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In essence, the Butler ruling declares certain anti-rebate statutes in Florida to be unconstitutional to the extent they prohibit a Florida title insurance agent from rebating a portion of the risk rate premium retained by the agent for services rendered (i.e., “Primary Title Services”) in connection with the issuance of title insurance policies. See Sec. 627.7711(b) Fla. Stat. Entitlement to any portion of the promulgated rate strictly depends on performance of these primary title services, or as HUD puts it, “core title services”.

HUD’s 1996 statement of policy (Title Insurance Practices In Florida) expresses the viewpoint that title insurance agents in Florida must perform all necessary core title services in order to qualify for the exemption under section 8(c)(1)(B). Payments of a fee by a title company (underwriter) to its duly appointed agent can only be made for services actually performed in the issuance of a policy of title insurance.

“Thus, as applied to practices in Florida, for a title insurance agent to be able to retain the maximum agency portion of the risk premium payment allowed under Florida law, the title insurance agent must actually perform “core title services,”.

“Core title services” are those basic services that a title insurance agent must actually perform for the payments from or retention of the title insurance premium to qualify for RESPA’s section 8(c)(1)(B) exemption for “payments by a title company to its duly appointed agent for services actually performed in the issuance of a policy of title insurance.” In performing core title services, the title insurance agent must be liable to his/her title insurance company for any negligence in performing the services. In considering liability, HUD will examine the following type of indicia: the provisions of the agency contract, whether the agent has errors and omissions insurance or malpractice insurance, whether a contract provision regarding an agent’s liability for a loss is ever enforced, whether an agent is financially viable to pay a claim, and other factors the Secretary may consider relevant. “Core title services” mean the following in Florida:

a. The examination and evaluation, based on relevant law and title insurance underwriting principles and guidelines, of the title evidence (as defined below) to determine the insurability of the title being examined, and what items to include and/or exclude in any title commitment and policy to be issued.

b. The preparation and issuance of the title commitment, or other document, that discloses the status of the title as it is proposed to be insured, identifies the conditions that must be met before the policy will be issued, and obligates the insurer to issue a policy of title insurance if such conditions are met.

c. The clearance of underwriting objections and the taking of those steps that are needed to satisfy any conditions to the issuance of the policies.

d. The preparation and issuance of the policy or policies of title insurance.

e. The handling of the closing or settlement, when it is customary for title insurance agents to provide such services and when the agent’s compensation for such services is customarily part of the payment or retention from the insurer.

See also: http://www.lenderspolicy.com/title-insurance/the-florida-butler-rebate-did-it/ ; Primary Title Services; Title Insurance Practices In Florida (HUD 1996 Statement Of Policy)

Other states (New York) stressing the need to perform Core Title Services: http://www.benchmarkta.com/news_items/NYSLTA_Partridge.pdf (New York State Land Title Association Guest Columnist. By  Jean Partridge, Chief Counsel and Managing Member Benchmark Title Agency, LLC)

“For these reasons, we declare the anti-rebate statutes, as they relate to a title agent’s ability to negotiate his or her share of the risk premium, to be unconstitutional.” Chicago Title Insurance Co., et al., Appellants, vs. S. Clark Butler, et al., Appellees. [October 19, 2000] Corrected Opinion PER CURIAM

Within the past several years, there have been a series of Florida reissue rate class action settlements involving title insurance underwriters that appear to be consistent with the decision in S. Clark Butler vs Florida Department of Insurance. The consistency factor, however, lies in the fact that the settlement agreements themselves exclude overcharges, if any, with respect to the portion of the title insurance premium retained by the issuing agents. This portion (usually 70% of the risk rate premium) is for services rendered with respect to the agencies performance of primary title services.  See Sec. 627.7711, Fla. Stat.; Sec. 626.841, Fla. Stat.

Primary title services” means determining insurability in accordance with sound underwriting practices based upon evaluation of a reasonable title search or a search of the records of a Uniform Commercial Code filing office and such other information as may be necessary, determination and clearance of underwriting objections and requirements to eliminate risk, preparation and issuance of a title insurance commitment setting forth the requirements to insure, and preparation and issuance of the policy. Such services do not include closing services or title searches, for which a separate charge or separate charges may be made.

The Butler case suggests that any attempt to bind title insurance agents in a reissue rate consumer class action lawsuit filed against a title insurance underwriter in Florida that alleges a premium overcharge could be problematic, especially in regard to satisfying the elements needed for class certification. Real estate transactions involving a Butler-negotiated rebate present individualized issues of peculiar matter (i.e., private contractual interactions between the policy issuing agent and the consumer) with respect to the portion of the premium charged for the performance of these primary title services. This fact alone could undermine class claims in any class action lawsuit brought that insist on an attempt to bind portions of the title insurance premium charged for the performance of primary title services.

As a result of Butler, Florida title insurance rates are promulgated with respect to the underwriter’s portion of the total premium charge and negotiable with respect to the agents portion. For example, assume a situation where a consumer is given a Butler rebate and the transaction calls for the consumer to be given a reissue credit. If the consumer doesn’t receive it, the premium charged to the consumer could still fall below the rate permitted pursuant to the Florida promulgated rate scheme, but only to the extent of the agencies portion. In Florida, the agencies’ portion can be as high as 70% of the total risk rate premium set forth in the F.A.C.  The underwriter, however, in a situation identical to the one quoted above would still collect from the consumer a premium (based on a 70% /30% split) in excess of what the regulations permit an industry to charge, which would constitute an unjust enrichment.

Finally, the Butler case delineates terms for a negotiated marketplace between title insurance agents and consumers with respect to the charge for the performance of primary title services. Essentially, these are private contracts between consumers and title insurance agents. The inescapable conclusion is that these transactions involve individual issues of peculiar matter with respect to the portion of the title insurance premium retained by the issuing agent.

Disclaimer: Information on this Web site should in no way be construed as legal advice. If you need legal advice, you may wish to consult an attorney.

The lawsuit was titled Edward and Annette Hawly, individually and on behalf of all others similarly situated v. American Pioneer Title Insurance Company, Case Number 03-016234 (11). Plaintiffs sought certification of their lawsuit as a statewide class action. Lawsuits making similar allegations have been filed against every major title insurance underwriter in Florida.

• Hawley v. American Pioneer Title Insurance Company, In the 17th Judicial Circuit in and for Broward County, Florida, Case No.: CA-03-016234 (11) (class action settlement approved based on overcharges for title insurance).

• Thula v. Lawyers Title Insurance Corporation, In the 17th Judicial Circuit in and for Broward County, Florida, Case No.: 04-05324 (11) (class action settlement approved based on overcharges for title insurance).

• Devick v. Attorney’s Title Insurance Fund, In the 17th Judicial Circuit in and for Broward County, Florida, Case No.: 04-06633 (08) (class action settlement approved based on overcharges for title insurance).

• Rhodes v. Old Republic National Title Insurance Company, In the 15th Judicial Circuit in and for Palm Beach County, Florida, Case No.: 50 2004 CA 004073 XXXX MB (class action settlement approved based on overcharges for title insurance). Old Republic National Title Bulletin to all Florida offices.

• Evans v. Stewart Title Guaranty Company, In the 17th Judicial Circuit in and for Broward County, Florida, Case No.: 04-06630-05 (class action settlement approved based on overcharges for title insurance). Stewart Bulletin to all Florida issuing offices.

Pending Florida title insurance reissue rate class action cases:

Arthur Bleich and Gloris Elder v Chicago Title Insurance Company, In the 11th Judicial Circuit in and for Miami-Dade County, Florida (Class has been certified)

http://www.cticclassaction.com/

Case Number (Local): 2007-15721-CA-01
Case Number (State): 13-2007-CA-15721-0000-01
Filing Date: 05/25/2007
Judicial Section: 27

Kenneth E. Higgins v Commonwealth Land Title Insurance Company, In the 4th Judicial Circuit in and for Nassau County, Florida

Related Items: Commonwealth Land Title Ins. Co. v. Higgins, 975 So. 2d 1169 (Fla. 1st DCA 2008). Reversal of class action discovery order requiring production of over 300,000 title agent closing files. Play Video

Holding: The District Court of Appeal, Van Nortwick, J., held that the precertification discovery would be unduly burdensome. Relief Granted. Kahn, J., dissented and filed opinion. See Link

HIGGINS VS COMMONWEALTH LAND-Motion-Granting-Class-Certification.pdf

Florida First District Court of Appeal Docket: Case Number: 1D10-2139

James Vincent Raffone v First American Title Insurance Company, In the 4th Judicial Circuit in and for Nassau County, Florida

Related Items: First American Title Insurance Company v. Vincent V. Raffone. Petition for Writ of  Certiorari (Fla. 1st DCA 2008). Play Video

FIRST AMERICAN TITLE INSURANCE COMPANY v. JAMES V. RAFFONE-Motion-Granting-Class-Certification.pdf

Florida First District Court of Appeal Docket: Case Number: 1D10-2114

Carmen J. Grosso v Fidelity National Title Insurance Company of New York, In the 17th Judicial Circuit in and for Broward County, Florida.

Related documents: Carmen J. Grosso and James Chereskin, Appellants, vs. Fidelity National Title Insurance Co. and Janet Figueroa, Appellees.pdf

Related documents: Fidelity National Title Insurance Co. and Janet Figueroa v. Carmen J Grosso and James Chereskin On Appeal from 3rd District Court of Appeals.pdf

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	24 CFR Part 3500 Final Rule as of 2009
	24 CFR Part 3800 Final Rule as of 2009

Appendices

	Appendix A Instructions for Completing HUD-1 and HUD-1-A Settlement Statements; Sample HUD-1 and HUD-1-A Settlement Statements
	Appendix B Illustrations of Requirements of RESPA
	Appendix C Sample Form of Good Faith Estimate
	Appendix D Affiliated Business Arrangement Disclosure Format
	Appendix E Arithmetic Steps Illustrating Aggregate Analysis

New RESPA Rule FAQs

See also: Withdrawal of definition of “Required Use”

ERICK C. CARTER, et al., Plaintiffs-Appellants, UNITED STATES OF AMERICA, Intervenor, v. WELLES-BOWEN REALTY, INC., et al., Defendants-Appellees.

The Florida Association of Realtors has perpetuated the widespread use of the FAR/BAR contract. The title insurance industry and the Florida Bar should have no complaints. The language found in the conveyance section of the FAR/BAR contract states as follows:

“Seller shall convey marketable title to the Real Property by statutory warranty… deed” See FAR/BAR Contract Revised 09/07; FAR/BAR ASIS-2x Rev. 2/08.

The FAR/BAR contract, however, offers no alternative to using a general warranty deed. The FAR/BAR contract is devoid of language which gives parties involved in a real estate transaction the ability to employ the use of a special warranty deed without making specific changes to the printed version of the contract. The use of a general warranty deed could subject a seller to liability beyond the policy limits of any previously issued owner’s policy (i.e., continuity of coverage after conveyance) insuring that seller in the event of a lawful title claim against a subsequent purchaser. A special warranty deed, however, warrants the title only with respect to acts of the grantor and the interests of anyone claiming by, through, or under him.

The FAR/BAR contract in its present form would need modification in order to employ the use of a special warranty deed. The only choice the parties really have in the absence of modifying the contract is for the seller to convey by statutory warranty deed. This makes it virtually impossible for buyers and sellers to effectively negotiate with respect to the issue of which type of deed the seller will be using to convey title to the real property. The Florida Association of Realtors has taken the position that any realtor who influences “choice of deed used” in connection with representing buyers and sellers in a real estate transaction would be engaging in the unlicensed practice of law. This might explain the reluctant behavior on the part of the Florida Association of Realtors in not allowing complete choice with respect to alternative methods of conveyance. What seems confusing, however, is that FAR would rather steer buyers and sellers to the use of a given instrument to convey title rather than allow market forces to properly address the issue of type of deed used in conveying title to real property. Does this steering constitute the unlicensed practice of law? Is this an attempt by the FAR/BAR committee to restrict negotiations between buyers and sellers of real property regarding the use of a certain instrument of conveyance?

Real property sellers using a FAR/BAR contract might be concerned with the following:

the use of a general warranty deed could subject a seller to liability beyond the policy limits of any previously issued owner’s policy (i.e., continuity of coverage after conveyance) insuring that seller in the event of a lawful title claim against a subsequent purchaser in connection with acts which predate the seller’s ownership.

the widespread use of the general warranty deed benefits the title insurance industry in that any title insurance underwriter who issues an owner’s policy in connection with a transaction that employed the use of a FAR/BAR contract would hold the seller accountable for the defenses and warranties made in connection with the transfer of title. The title insurance underwriter has a duty to indemnify and defend the insured in the event of a lawful claim. Thus, a seller could, in fact, be liable as a result of unmarketable title in connection with acts which predate the seller’s ownership.

the widespread use of the general warranty deed benefits Florida Bar members (the legal community) in that a closing attorney who represents a buyer and issues an owner’s policy could easily argue in favor of buyer in a lawsuit filed against seller in the event of a lawful title claim made against buyer in connection with acts which predate the seller’s ownership.

A Florida statutory warranty deed fully warrants the title to the real property and explicitly states that the seller will defend against the lawful claims of all persons whomsoever. See Sec. 689.02, Fla. Stat.

Pursuant to Florida law, a conveyance executed substantially in the foregoing form shall be held to be a warranty deed with full common-law covenants, and shall just as effectually bind the grantor, and the grantor’s heirs, as if said covenants were specifically set out therein. And this form of conveyance when signed by a married woman shall be held to convey whatever interest in the property conveyed which she may possess. Sec 689.03, Fla. Stat.

Certain provisions to consider:

“The coverage of this policy shall continue in force as of Date of Policy in favor of an insured only so long as the insured retains an estate or interest” … “Or only so long as the insured shall have liability by reason of conveyance of warranty made by the insured in any transfer or conveyance of the estate or interest.” ALTA Owner’s Policy (10-17-92)

“Seller shall convey marketable title to the Real Property by statutory warranty… deed” See FAR/BAR Contract Revised 09/07; FAR/BAR ASIS-2x Rev. 2/08.

“And the said party of the first part does hereby fully warrant the title to said land, and will defend the same against the lawful claims of all persons whomsoever.” See Sec.689.02, Fla. Stat. Form of Warranty Deed Prescribed

Hypothetical

You purchase $200,000.00 of owner’s title insurance coverage. 5 years later, you sell your home for $600,000.00. You convey title using a Florida statutory warranty deed as defined in Sec.689.02, Fla. Stat. As a result, your exposure with respect to liability in the event of unmarketable title could exceed policy limits of your previously issued owner’s policy. The continuous coverage provided in your original owner’s policy of $200,000.00 is by virtue of conveyance of warranty made by you, the insured, in your transfer or conveyance of your estate or interest. However, If you chose to convey title by special warranty deed, given the option, the continuous coverage provided in the ALTA owner’s policy (ALTA Owner’s Policy (10-17-92)) would not apply and you would not be subject to liability predicated on acts prior to your ownership in the absence of fraud.

• The United States Department of Justice (”DOJ”) and the Federal Trade Commission (”FTC”) comments to the American Bar Association on the Proposed Model Definition of the Practice of Law (12/20/2002)

• Antitrust Division Documents

Nancy Norelli is a Florida lawyer and Jack Laufer is a Florida title agent and real-estate broker.

Disclaimer: Information on this Web site should in no way be construed as legal advice. If you need legal advice, you may wish to consult an attorney.