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Appellate Court Reinstates Some Regulations Governing Title Insurers, Invalidates Others

In October 2017, the New York State Department of Financial Services issued regulations governing title closers and other agents in the real estate market. Implementation of the regulations was enjoined by order of a lower court, which initially ruled that the regulations were invalid.  In Matter of New York State Land Title Ass’n, Inc. v. New York State Dep’t of Financial Services, 2019 N.Y. Slip Op. 245, 2019 N.Y. App. Div. LEXIS 243 (1st Dep’t Jan. 15, 2019), the Appellate Division modified the lower court’s ruling and reinstated a majority of the regulations, including those governing the types of expenses that title insurers may include in calculating premiums.  However, the appellate court invalidated a regulation that would have banned in-house title closers from collecting certain fees, while allowing independent closers to charge the same fees.  The court concluded that the “rationale for this internally inconsistent regulation fails to justify the distinction between independent and in-house closers.”  The court also invalidated a regulation that would have capped the fees for certain “ancillary searches” at 200% of the out-of-pocket cost of the searches, finding that the agency had not provided a rational basis for the percentage cap.