Title Insurers Fight for Their Right to Wine and Dine

New state rules are designed to end New York title insurance companies’ long-standing practice of entertaining prospective clients – at fine restaurants, sporting events, even strip clubs – and then passing those costs on to homebuyers st closings in the form of “marketing fees.” Now comes the pushback.

The New York State Land Title Association, along with Great American Title Agency and Venture Title Agency, has filed a legal challenge to the new rules, which were put forth by the Department of Financial Services (DFS) and took effect Feb. 1, the Real Deal reports. In court documents, the title insurers claim the new rules will “wreak havoc” on title companies by forcing company closures, layoffs and reduced services. “DFS must be stopped,” the title companies said in court documents. Marketing activities “are critical for the success of the industry.” 

Unfolding against the backdrop of the ongoing corruption trial of Joseph Percoco, a former aide to Gov. Andrew Cuomo, the title insurance tiff illustrates just how difficult it is to change the money-driven culture in Albany. Even before the new title insurance regulations went into effect, the state Senate passed a bill to soften the rules. The Assembly’s insurance committee is currently working to make changes to the Senate bill. And now comes the lawsuit.

Assemblyman Kevin Cahill, a Democrat from Kingston, explained the rationale behind the lawsuit this way: “You don’t come to the Legislature to overrule an agency if an agency has overstepped bounds. You go to court.”

Most homebuyers purchase title insurance – sometimes for thousands of dollars – to make sure there are no liens on the property and they’ll have clear claim to the title once they plunk down their cash. Title insurers customarily entertain buyers’ mortgage brokers, lawyers and real-estate agents in order to win their clients’ business. 

At a hearing in January, DFS Superintendent Maria Vullo said there is “no place” for companies to win business on the basis of who “can lavish the most expensive gifts, throw the best parties, hand out the best seats to sporting events, or socialize with referral sources at strip clubs.”

Dream on. This is New York.