Judge overturns state's title-insurance regulations
- Rules barring gift-giving and other perks exceeded government's authority
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A judge overturned the state's new regulations designed to prohibit lavish gift-giving in the title insurance industry. The Thursday ruling in Manhattan Supreme Court deals a huge blow to the Cuomo administration, which vowed to lower rates for consumers but was found to have written an overly broad rule that exceeded its legal authority.
Last spring, Department of Financial Services Superintendent Maria Vullo announced a set of rules that, among a number of strictures, would have prohibited title insurance firms from giving gifts or meals to real estate brokers, banks and other professionals who refer home buyers to a particular title insurer. The cost of dinners, sporting events and even strip club outings, Vullo argued, were being baked into insurance premiums.
The rules went into effect earlier this year, prompting trade groups including the New York State Land and Title Association to successfully sue to get them overturned.
Judge Eileen Rakower's decision, which was first reported by The Real Deal, annulled all of the new statutes after finding, for example, that they would broadly prohibit title insurers from promoting themselves—something the state Legislature did not intend when it wrote the law.
"To construe [the law] in this manner is to hold that the Legislature intended to prohibit title insurance corporations from marketing themselves for business—an absurd proposition," Rakower wrote, validating many of the arguments made by title insurers and lawmakers who attempted to defang the regulations through legislation.
The ruling was a major victory for the industry, which had argued the new rules would cripple business.
"The court's thorough decision was very clear: these sweeping regulations exceeded the scope of [the department's] statutory authority and should never have been adopted," Mylan Denerstein, an attorney who represented the title insurance groups, said in a statement.
However, the state vowed to appeal and doubled down on the need for regulations.
"[The department] remains steadfast in our belief that Regulation 208 is a necessary supervisory tool to ensure appropriate market conduct and to protect New York consumers," Vullo said in a statement.
by Joe Anuta
Reprinted with permission from Crain's. If you have any comments or suggestions, let us know here.