Title Insurance Reform Bill Advances

18 February 2009

Title Insurance Reform Bill Advances

Measure Clears Committee on 6-1 Vote

The New Mexican

Anew attempt to reform title insurance cleared its first committee Tuesday, after one side said it would protect consumers and give them competitive prices while the other said it could put title companies out of business.

House Speaker Ben Luján’s bill seeks to end New Mexico’s long-held practice of setting a single rate for all companies and take away title companies’ immunity from being sued for negligence. House Bill 488 cleared the House Consumer and Public Affairs Committee on a 6-1 vote.

A Santa Fe businessman, Kurt Faust, testified that he and his business partners were constructing an office building on Pacheco Street in 2002 and were putting in a second floor when a neighbor said they were violating an earlier agreement that restricted the building height to a single story. It turned out the neighbor was right, and the title company knew about the agreement but because of a clerical error hadn’t disclosed it in the title document, Faust said.

“It would have changed our decision to purchase the property,” Faust said.

Several title insurers from rural areas said lifting negligence immunity would narrow their already slim profit margins because their own insurance would cost more.

“This is a trial lawyer’s smorgasbord,” said Josh Payne, owner of San Juan Title in Farmington.

Agents from Clovis, Raton and Alamogordo said they had just two or three other small competitors and that opening up price competition would let larger insurers wipe them out.

The lone nay vote came from Zachary Cook, R-Ruidoso, while the committee’s other Republican, Thomas Anderson of Albuquerque, said title companies shouldn’t have special treatment.

“Title insurance should be treated like any other insurance and certainly it’s not,” Anderson said.

Luján said he supports the title industry and hoped adjustments could be made to protect small businesses. Luján’s son, Congressman Ben Ray Luján, tried to champion similar legislation while a member of the state Public Regulation Commission.

After the vote, Ed Roibal, executive director of the New Mexico Land Title Association, said protecting small businesses would be impossible if any changes included lifting negligence immunity. “There is no partially pregnant,” he said. “That negligence liability will decimate the industry.”

HB488 is next scheduled to be heard by the House Business and Industry Committee.

On Monday, the Senate Corporations Committee tabled a competing bill, SB524, which the PRC supports and didn’t include price competition or negligence.