Professional Documents
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NAILTA Amicus Brief
NAILTA Amicus Brief
I. INTERESTS OF AMICUS………………………………….. 1
II. ARGUMENT………………………………………………..... 2
III. CONCLUSION……………………………………………… 15
Certificate of Compliance…………………………………… 16
Certificate of Service………………………………………… 20
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TABLE OF AUTHORITIES
CASES:
STATUTES:
OTHER AUTHORITIES:
Birnbaum, Birny, Report to the California
Insurance Commissioner, “An Analysis of
Competition in the California Title
Insurance and Escrow Industry,” December 2005 6
iii
of Title Insurance, Praeger Press, Westport, CT, 1994 6
INTERNET SOURCES:
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I. INTERESTS OF AMICUS
insurance industry stakeholders from across the United States. Amicus’ sole
order to promote and protect fair competition in the title insurance industry.
Amicus believes that this brief will assist the Court in understanding the
practices such as that alleged in this case are harmful to our industry and the
general public.
the land title process. As part of that mission, NAILTA represents the
independence of the title insurance industry from its referral sources and the
Association advocates for fair competition in the industry and the removal of
competition, reduce the transparency of both the title insurance industry and
the real estate process, and undermine the consumer’s choice of title
insurance provider.
and the title insurance consumers (i.e., homeowners, buyers and borrowers).
II. ARGUMENT
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to title defects such as: liens or encumbrances upon, defects in, or the
unmarketability of the title to real property for which the policy is issued.
These contracts of indemnity have evolved into two types of recognized title
insurance policies: (i) those policies issued to protect buyers of real estate
(Owner’s Policy of Title Insurance); and (ii) those policies issued to lenders
to protect the mortgage’s title, which secures the loan (Loan Policy of Title
Insurance).
general liability insurance) has always been the commitment of the title
future event such as death or accident. The title insurance approach of “risk
prevention” has as its goal the elimination of risks and the prevention of
losses caused by defects in title arising out of events that occurred in the
past.
Prior to World War II, the growth of the title insurance industry had
been limited to local and regional title insurance underwriters. After World
3
War II the enormous demand and expansion of home ownership produced an
Starting in the 1960’s the title insurance industry saw the emergence
of national title companies which caused a decline in the local and regional
title insurance underwriters in the national title insurance industry have left
the industry with only four underwriter groups controlling over 92 percent of
all title insurance business nationwide. 1 One of these groups includes the
competition among title insurance underwriters and has impacted the quality
of the product and service being provided by the title insurance underwriters.
products not to the ultimate consumer, who either owned or was buying a
1
American Land Title Association, “Preliminary Third Quarter 2008 Market
Share - Family-Company Summary” at http://www.alta.org/industry/08-
03/Marketshare3rdQuarterfamcosummary.xls (last visited March 11, 2009).
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home, but to third parties involved in the real estate transactions (i.e., real
became the dominant source of business for title insurance because of the
third party’s access to the real estate transaction and that person’s general
The term “reverse competition” was applied to this title insurance industry
marketing practice. 2
numerous studies and articles. 3 The common theme in each of these studies
2
See The Pricing and Marketing of Insurance: A Report of the Department
of Justice to the Task Group on Antitrust Immunities, January 1977, pages
250-274.
3
Title Insurance Cost and Competition: Before the House Committee on
Financial Services Subcommittee on Housing and Community Opportunity,
109th Cong., (2006) (testimony of J. Robert Hunter, Director of Insurance,
Consumer Federation of America) see also, Jack Guttentag, “Real Estate
Settlement Services Take Bite Out of Borrowers,” Inman News, September
6, 2005; see also, The Pricing and Marketing of Insurance: A Report of the
Department of Justice to the Task Group on Antitrust Immunities, January
1977, pages 250-274; “Chapter XII The Title Assurance and Conveyance
Industries” of Real Estate Closing Costs, RESPA, Section 14a, Volume II
Settlement Performance Evaluation prepared by Peat, Marwick, Mitchell
and Co. for the Department of Housing and Urban Development, October
1980; State of California Department of Insurance Bulletin 80-12, December
24, 1980, Subject: Insurance Code Section 12404 - Unlawful Rebates; Title
5
and articles is the lack of competition that exists in the title insurance
industry and the negative impact “reverse competition” has on title insurance
underwriters, title insurance agencies, the title insurance consumers and the
transaction.
the title insurance industry, most title insurance underwriters and title
insurance agencies compete with other underwriters and agencies for the
referral activities in the title insurance industry. This, in turn, led to the
enactment of the Real Estate Settlement Procedures Act of 1974, Pub. L. No.
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(a) Business referrals
estate brokers, real estate agents, mortgage brokers, and mortgage lenders).
4
12 U.S.C. § 2607(a)-(b).
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the agency. Often the referral source had no active participation in the
agency’s business but due to the “referral” of business to the title insurance
profit. The profit in some instances was determined from the gross income
and not net profits. Questions began to be raised whether or not these
of RESPA.
5
Edwards v. First American Corp., 517 F. Supp. 2d. 1199, 1203 (C.D. Cal.
2007).
6
Carter v. Welles-Bowen Realty, Inc., 553 F.3d 979, 2009 U.S. App. Lexis
1288 (6th Cir. 2009) (citing Kahrer v. Ameriquest Mortgage Co., 418 F.
Supp. 2d 748 (W.D. Pa. 2006) (citing H.R. Rep. No. 97-532, at 52 (1982)
(emphasis added))).
8
These “affiliated business arrangements” and “controlled business
The subject transaction between First American and Tower City is not such
an arrangement.
the “business” of a “referral source,” the title insurance industry has also
share within the title insurance industry to the exclusion of other title
estate purchase or refinance, it is the title insurance agency and not the title
insurance consumer involved that makes the referral to the title insurance
underwriter.
7
Birnbaum, Birny, Report to the California Insurance Commissioner, “An
Analysis of Competition in the California Title Insurance and Escrow
Industry,” December 2005, page 60.
9
A CTIA occurs when a title insurance underwriter purchases a
may already represent multiple title insurance underwriters, and who has a
substantially all of the title insurance agency’s title business to the exclusion
of all other title insurance underwriters who, prior to the agreement, received
referral of title business from the now “captive” title insurance agency.
which title insurance underwriter was best suited for a particular real estate
10
A title insurance underwriter’s use of CTIAs has the same effect of
8
Carter v. Welles-Bowen Realty, Inc., 553 F.3d 979, at 987, 2009 U.S. App.
Lexis 1288 (6th Cir. 2009) (citing Kahrer, supra at 754 (citing H.R. Rep.
No. 97-532, at 52 (1982) (emphasis added))), (citing Robinson v.
Fountainhead Title Group Corp., 447 F. Supp. 2d 478, 488-89 (D. Md.
2006).
11
At issue in the present case is the selection of a title insurer once the
referral is made. Upon being referred to a title insurance agency, the title
title insurance agency in the title insurance transaction. The title insurance
insurance policy. One feature of the growing variance among title insurance
9
See Carter supra at 987 (citing Kahrer, 418 Fed. Supp. 2d. at 754 (quoting
H.R. Rep. No. 97-532, at 52) (emphasis added).
12
title insurance has historically been a search or examination of the public
land records for title defects prior to issuance of title insurance. This title
policy. During the title search, title companies find and fix problems with
standards that marks the difference in the quality of the risk avoidance being
prior to the issuance of title insurance, has been lessened due to the rising
cost of securing title insurance market share and the necessity to compensate
the referrer of the title insurance business, whether as CTIAs or other anti-
10
American Land Title Association, Title Insurance: A Comprehensive
Overview, pg. 2 at http://www.alta.org/about/TitleInsuranceOverview.pdf
(last visited March 11, 2009).
13
In a cost saving measure some national title insurance underwriters
underwriter to search only the current owner’s title back to the moment that
owner took title, thereby omitting liens and other encumbrances that would
have attached to the interest held by prior owners in title. This is in contrast
title search” of forty plus years beginning from the deed or “root” of the
current owner’s title. Only through a “full title search” and a detailed listing
the status of his title prior to the issuance of the title insurance policy. 11
standards of one title insurance underwriter versus another and the impact
this variance has on the quality of the final title insurance product. When a
11
Ohio State Bar Association Report, Vol. 59, No. 48, Section One,
December 15, 1986, p. 1968. The Council authorized the following
Comment in lieu of the OSBA Title Standard 2.2 regarding land title
searches: "There is nothing in the Ohio Marketable Title Act that entitles a
title examiner to rely upon a simple forty year search period. He or she must
be aware of the several exemptions in the Act that are not barred by the mere
passage of 40 years.”
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service to the title insurance consumer. In these cases, that choice means the
difference between eliminating risk and assuming it. For unsuspecting title
III. CONCLUSION
damage and harm to the title insurance consumers who were denied a
Respectfully submitted,
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CERTIFICATE OF COMPLIANCE
font.
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DISCLOSURE OF CORPORATE AFFILIATIONS AND OTHER
ENTITIES WITH A DIRECT FINANCIAL INTEREST IN
LITIGATION
disclosure:
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MEMBERSHIP LIST - NAILTA
Brandywine 4 Building
3 Dickinson Drive
Suite 204
Chadds Ford, PA 19317
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NAILTA - Membership List (Continued)
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CERTIFICATE OF SERVICE
I hereby certify that on the 12th day of March, 2009, I electronically filed the
foregoing with the Clerk of the Court for the United States Court of Appeals
I certify that all participants in the case are registered CM/ECF users and
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