BULLETIN 1989-12

 

1989 HOUSE BILL NO. 2497

 

May 17, 1989

 

This Bulletin is to advise Kansas title companies and their title agents of a new law that become effective July 1, 1989 in Kansas.

 

A copy of the entire bill is attached; however, please refer specifically to Section 1(d)(2).  It was clearly the intent of the legislature to require the filing of any item which results in a charge to the insured for title insurance or other services performed in connection with real estate transactions by either the title insurance company or its title agents.

 

In order to implement and comply with House Bill No. 2497, all title insurers must file, prior to July 1, 1989 all material required in Section 1(d)(2) of the law, including every manual or other reference material containing classifications, rules, rates, rating plans and current rate cards.

 

Furthermore, all title agents and agencies subject to the legislation, must file, prior to July 1, 1989, their current manual of classifications, rating plans, rate cards and all material required by Section 1(d)(2) of the law. In the case of agencies, if the material to be filed by the agency and each agent in the agency would be identical, only one copy of the material needs to be filed but must be accompanied by a listing of the individual agents upon whose behalf it is filed.  The format in Attachments 1, 2 and 3 must be used when filing the material.  This may be done by using the attached forms and retaining a photocopy of your file or by retyping the form(s) using only the service or transaction descriptions pertinent to your operations.  In this regard, we have attempted to include service and transaction descriptions that are common to most title insurance agents, agencies and insurers in this state. However, if you perform services or engage in transactions not included in these descriptions, please describe the service or transaction in the space captioned “OTHER”.

 

KANSAS BULLETINS

 

INSURANCE DEPARTMENT

 

TOPEKA

 

As used in House Bill No. 2497, it can be assumed that the following terms have the following meanings:

 

“Classification” means the type of transaction, description, or explanations used to determine what kind of title insurance product and/or title insurance risk a particular rate or rating plans applies to.

 

“Rules” means the instructions, definitions or other guidance that governs the actual application of a rate or rating plan to a given classification.

 

“Rates” means the charge per a specified amount of insurance that, when calculated, determines the charge for title insurance.

 

“Rating plans” means pre-determined formulae or instructions that can be used to modify the otherwise applicable rates or premiums for individual title insurance risks.

 

“Real estate transaction” means any transfer of interest in real property.

 

“Services” means notary, escrow, document preparation, filing or other activities performed in connection with a real estate transaction or the sale, service or issuance of a title insurance policy.

 

Please note that no charge may be made for title insurance or any service performed in connection with a real estate transaction to which the act applies by any title insurance agent, agency or company that has not been filed with the Commissioner.

 

Also, it is anticipated that filed rates may not produce a reasonable rate for a specific risk.  In such situations, an individual risk rate may be filed in accordance with a “Unique and Unusual Rule.” (U&U Rule) A sample copy of a U&U Rule is attached which may be filed by either the insurer, the agent, or both.  Once the rule is filed, then individual risk rates can be filed by the entity whose filed rates or charges have been modified in accordance with the rule.  It should be emphasized that this rule is to be used only when the characteristics of an individual risk demand special rate considerations.

 

In situations where, because of competition, inflation, changes in the nature of the described services or transactions, or the rates and charges then on file otherwise become obsolete, new rates for general application to such services or transactions must be filed before they can be quoted or used.  Since the rates or charges are not subject to approval this involves only a transmittal to and receipt of the new rates by the insurance department.

 

Please take such steps as are necessary to file the material required by House Bill No. 2497 prior to July 1, 1989.

 

KANSAS BULLETINS

 

HOUSE BILL NO. 2497

 

AN ACT

 

relating to title insurance; concerning rate filings therefore and other services in connection with certain real estate transactions; providing for violations; amending K.S.A. 40-1111 as amended by section 19 of chapter 156 of the laws of 1988 and repealing the existing section.

 

Be it enacted by the Legislature of the State of Kansas:

 

Section 1. K.S.A. 40-1111, as amended by section 19 of chapter 156 of the laws of 1988, is hereby amended to read as follows: 40-1111. (a) The purpose of this act is to promote the public welfare by regulating insurance rates to the end that they shall not be excessive, inadequate and unfairly discriminatory and to authorize and regulate cooperation among insurers in rate making and other matters under the scope of this act.  Nothing in this act is intended: (1) To prohibit or discourage reasonable competition, or (2) to encourage or prohibit, except to the extent necessary to accomplish the aforementioned purpose, uniformity in insurance rates, rating systems, rating plans or practices.  This act shall be liberally interpreted to carry into effect the provisions of this section.

 

(b)        This act applies to casualty insurance, including fidelity, surety and guarantee bonds, on risks or operation in the state except reinsurance, other than joint reinsurance to the extent stated in K.S.A. 40-935 and amendments thereto, accident and health insurance, insurance against loss of or damage to, or against liability, other than workmen’s compensation and employers’ liability, arising out of the ownership, maintenance or use of any aircraft.

 

(c)        As used herein, the term “casualty insurance” shall be construed to apply to and include the classes of insurance authorized to be transacted in this state pursuant to paragraphs (b), (c), (d), (e) as limited by subsection (d) of this section, (i), (j), (k), (l) and (m), of K.S.A. 40-1102 and amendments thereto; paragraphs (b), (d), (e), (f), (g) and (h) of K.S.A. 40-1203 and amendments thereto; and K.S.A. 40-1301 and amendments thereto, and this act shall also apply to credit insurance written by a mutual insurance company or by a reciprocal or interinsurance exchange.  This act shall also apply to reciprocal or interinsurance exchanges organized or operating under article 16 of chapter 40 of the Kansas statutes Annotated, with respect to the classes of insurance enumerated in the preceding sentence of this section.  If any kind of insurance, subdivision or combination thereof, or type of coverage, subject to this act, is also subject to regulation by another regulatory act of this state, an insurer to which both acts are otherwise applicable shall file with the commissioner a designation as to which rate regulatory act shall be applicable to it with respect to such kind of insurance, subdivision or combination thereof, or type of coverage.

 

(d)(1)     Only for the purpose of [Regulating] filing the rates for title insurance as specified in subsection (e) of K.S.A. 40-1102 and amendments thereto, all charges made in connection with the issuance, sale and servicing of title insurance policies or real estate transactions by title insurance companies, agencies and agents on property located in counties having a population of more than [150,000] [10,000] shall be [construed as premium and] subject to [regulation] filing pursuant to this act, [but] only the portion of such charges made for the assumption of risk under title insurance policies shall not be construed as premium for the purposes of K.S.A. 40-252, and amendments thereto.  [Nothing in this subsection shall be construed to give the commissioner any authority to regulate the fees charged for any abstractor’s services.]  No provision of this act shall apply to the filing or regulation of title insurance rates other than the requirements imposed by this subsection.

 

(2)        Every insurance agent, agency or company authorized to transact title insurance in this state shall file with the commissioner every manual of classification, rules and rates, every rating plan, every rate card and every modification of the foregoing which may be used in connection with providing title insurance or other services in connection with real estate transactions on property located in counties having a population of 10,000 or more.  No charge may be made by any title insurance agent, agency or company that has not been filed with the commissioner as required by this section.  Any service customarily provided by a title insurance agent or affiliated entity that is not included in the rates shall be disclosed when the rates are filed with the commissioner.

 

New Sec. 2. Failure to file the rates or disclose the information required by subsection (d) of K.S.A. 40-1111 and amendments thereto shall constitute a violation of K.S.A. 40-2404 and amendments thereto and shall be subject to the penalties applicable thereto.

 

Sec. 3. K.S.A. 40-1111, as amended by section 19 of chapter 156 of the laws of 1988, is hereby repealed.

 

Sec. 4. This act shall take effect and be in force from and after its publication in the statute book.

 

Note:    Italics indicate new material; brackets indicate deleted material.

 

KANSAS BULLETINS

 

ATTACHMENT 1

 

CHARGE FOR ESCROW, CLOSING AND/OR OTHER SERVICES

 

Service                                                                                                              Charge

 

COMMERCIAL ESCROW CLOSING                                                                   $__________

Includes preparation of contracts, escrow agreements, transfer

of title documents (deed, mortgage, notes, assignments, etc.),

settlement statement (HUD-1), disbursement of funds

 

RESIDENTIAL REAL ESTATE CLOSING                                                             $__________

Includes preparation of contracts, escrow agreements, transfer

of title documents (deed, mortgage, notes, assignments, etc.),

settlement statements.  Without assistance of attorney and/or

broker.

 

RESIDENTIAL REAL ESTATE CLOSING                                                             $__________

Includes preparation of contracts, escrow agreements, transfer

of title documents (deed, mortgage, notes, assignments, etc.),

settlement statements.  With assistance of attorney and/or

broker.

 

 RESIDENTIAL LOAN CLOSING                                                                         $__________

Includes preparation of all loan documents required by the

lender including, but not limited to mortgage, deed of trust,

notes, riders, assignments, government regulation reports and

disclosures, disbursement of funds

 

DOCUMENT PREPARATION when not                                                                $__________

Included in closings:

1.  deeds

2.  mortgages, notes

3.  affidavits

4.  assignments, releases

5.  contract for deed/option contracts

6.  real estate contracts

7.  escrow deposit agreements

 

FEES FOR ANCILLARY SERVICES                                                                   $__________

notary public fees

cash

contract for deed

seller carry back

assumption

equity purchase

exchange of property

loan closing for third party lender

other

 

FORECLOSURE COMMITMENT

Commitment issued for filing foreclosure proceedings

a.  Do not take policy                                                                                         $__________

b.  Do take policy                                                                                               $__________

 

LOT SALE TO BUYER

(not builder)

a.  No policy until improvement completed                                                            $__________

b.  Policy issued for cost of lot                                                                            $__________

 

PLATTING COMMITMENT                                                                                  $__________

Issued to governmental body in lieu of attorney’s opinion to

show easements, taxes, mortgages, etc.  Nominal amount

 

INFORMATIONAL COMMITMENT                                                                       $__________

Issued for “amount to be agreed upon” where customer wants

check of title before sale/mortgage

 

CONVERT CONTRACT PURCHASERS POLICY TO                                             $__________

OWNERS POLICY

Issued when contract purchaser pays off contract and wants

current policy showing title in his name

 

MECHANICS LIEN WORK OUT                                                                          $__________

Obtaining lien waivers, disbursing funds to pay claimants

 

EXCHANGE CLOSING                                                                                       $__________

Closing transaction having more than one parcel of real

property

 

DISBURSEMENT OF FUNDS                                                                             $__________

No closing services but asked to disburse money

 

DISBURSEMENT OF FUNDS                                                                             $__________

No closing services, disbursing funds and collecting signatures

on documents furnished to us

 

INDEMNITY DEPOSIT                                                                                        $__________

Held in escrow, no closing

 

OTHER (Specify)                                                                                               $__________

                                                                                                                        $__________

                                                                                                                        $__________

 

*SERVICES CUSTOMARILY PROVIDED THAT ARE NOT INCLUDED IN THE ABOVE RATES (LIST)

 

*If there is a charge for such services, they should be included on the previous page.

 

KANSAS BULLETINS

 

ATTACHMENT 2

 

COMMERCIAL TITLE INSURANCE RATES

 

(Properties Except 1-4 Single Family Dwelling Units)

 

Type of Transaction                                                                                            Rate

 

OWNERS TITLE INSURANCE POLICY                                                                $__________

Policies will be issued to owners, contract vendees and lessees

 

MORTGAGE TITLE INSURANCE POLICY                                                            $__________

Issued to lenders in an amount not to exceed 120% of loan

amount

 

SIMULTANEOUS-ISSUED MORTGAGE POLICY                                                 $__________

Not exceeding the amount of owners policy issued simultaneous

therewith

 

SIMULTANEOUS-ISSUED MORTGAGE POLICY                                                 $__________

Where the amount of coverage exceeds the owners policy

 

SIMULTANEOUS-ISSUED LEASEHOLD POLICY                                                 $__________

Not exceeding the amount of owners policy issued to lessee

 

REFINANCE POLICIES – Loan Policy                                                                 $__________

Issued on property as a result of refinancing a previous loan

 

SECOND MORTGAGE POLICIES – Loan policy issued on                                    $__________

2nd, 3rd or more loans

 

REISSUE POLICIES – Policies issued on                                                            $__________

previously insured property

 

NEW CONSTRUCTION PENDING DISBURSEMENT                                            $__________

 

POLICY calling for periodic endorsements for increasing

liability and extending time of policy

 

NEW CONSTRUCTION OWNERS POLICY                                                          $__________

 

NEW CONSTRUCTION LOAN POLICY                                                                $__________

Issued to construction lender on construction loan (includes

binder or construction loan policies)

 

HOLD OPEN CHARGES                                                                                    $__________

 

ENDORSEMENT TO OWNERS POLICIES                                                          $__________

1.

2.

3.

 

ENDORSEMENT TO LOAN POLICIES                                                                $__________

1.

2.

3.

4.

 

OTHER (Specify)                                                                                               $__________

                                                                                                                        $__________

                                                                                                                        $__________

 

ATTACHMENT 3

 

RESIDENTIAL TITLE INSURANCE RATES

 

(1-4 Single Family Living Units)

 

Type of Transaction                                                                                            Rate

 

SPECIAL COVERAGES                                                                                     $__________

 

RESIDENTIAL NEW CONSTRUCTION LOAN                                                       $__________

POLICY issued with owners policy on new construction

 

SECOND MORTGAGE POLICIES – Loan policies issued on                                 $__________

2nd, 3rd or more loans

 

HOLD OPEN CHARGES                                                                                    $__________

RESIDENTIAL OWNERS POLICIES – Policies of title                                           $__________

insurance protecting the owners interest in one – four family

residences

 

RESIDENTIAL MORTGAGEES POLICIES – Policies of                                         $__________

title insurance protecting the interest of mortgage lenders

 

SIMULTANEOUSLY ISSUED LOAN POLICIES – A                                              $__________

loan policy issued simultaneously with the issue of an owners

policy in an amount equal to or exceeding the amount of said

loan policy

 

RESIDENTIAL CONSTRUCTION LOAN POLICY – A                                             $__________

loan policy issued specifically for the protection of the interest

in property taken as the result of the filing of a mortgage for

construction purposes

 

CONSTRUCTION LOAN BINDER (COMMITMENT) – A                                          $__________

commitment for title insurance issued specifically for the

protection of the interest in property taken as the result of the

filing of a mortgage for construction purposes

 

DEVELOPMENT LOAN POLICY – A mortgages policy                                         $__________

issued for the protection of the lender who provides the funds

to make improvements to the land so that said land can be

resold for a different purpose (i.e. subdivision development and

subsequent loan sales)

 

BUILDERS RATE (Residential Owners Policies) -                                                 $__________

A rate afforded to builder/developers which is less than the

normal residential owners rate due to discount for volume as

well as simplicity of search and examination

 

RE-FINANCE RATE FOR RESIDENTIAL                                                              $__________

MORTGAGEES POLICIES – A rate afforded to home

owners where a lenders policy is required by the lender as the

result of the refinance of the owners existing financing

 

RE-ISSUE RATE – A rate afforded to the owner as a seller                                    $__________

or borrower due to the fact that the title at issue had

previously been searched and examined for durability as

evidenced by the issuance of a policy of title insurance with a

prior date.

 

MULTIPLE LOT OR TRACT CHARGES – A charge made                                      $__________

in connection with the issuance of either an owners or a

mortgagees policy when the subject property consists of more

than one chain of title.

 

ABSTRACT RETIREMENT RATE – A reduction in the                                           $__________

premium charge as a result of being furnished an abstract of

title on the property to be insured and that the abstract

remains the property of the insured.

 

ENDORSEMENTS – Coverages added to the basic insurance                               $__________

contract which add additional coverage to the insured and

consequently additional risk to the insurer.  Specify type of

endorsement and the charge/rate for each.

 

LEASEHOLD POLICIES – Policies issued to protect the                                       $__________

interest of a lessee in real property insuring the validity of an

option to purchase granted to a lessee.

 

COMMERCIAL TITLE INSURANCE RATE -                                                          $__________

Premiums charged on policies issued on transactions involving

commercial, multi-family, or industrial real estate.

 

CANCELLATION FEE – A charge made for actual work                                         $__________

performed on a title insurance file that for some reason or

circumstances does not result in the issuance of a title

insurance policy

 

OTHER – (Specify)                                                                                             $__________

                                                                                                                        $__________

                                                                                                                        $__________

 

EXAMPLE

 

TITLE INSURANCE

 

SPECIAL RULE FOR RATING UNIQUE

OR UNUSUAL CONDITIONS

 

IF IT CAN BE CLEARLY DEMONSTRATED THAT A RISK PRESENTS UNIQUE OR UNUSUAL CONDITIONS OF EXPOSURE OR HAZARD SUCH THAT THE APPLICATION OF THE NORMAL RATING PROCEDURE DOES NOT PRODUCE A REASONABLE AND EQUITABLE RATE FOR THE RISK, SUCH RISK MAY BE TREATED ON AN INDIVIDUAL RATE BASIS.

 

REQUESTS FOR TREATMENT UNDER THIS RULE SHALL BE SUBMITTED TO THE INSURANCE COMMISSIONER AND SHALL BE ACCOMPANIED BY EVIDENCE SPECIFICALLY SETTING FORTH THE REASONS FOR THE REQUEST ALONG WITH THE FULL SUPPORTING INFORMATION EVIDENCING THAT THE SPECIAL TREATMENT IS NOT A VIOLATION OF K.S.A. 40-2404(14) RELATING TO REBATES AND OTHER INDUCEMENTS IN TITLE INSURANCE.  SUCH RATES MUST BE FILED WITH THE COMMISSIONER OF INSURANCE WITHIN THIRTY (30) DAYS AFTER BEING MADE EFFECTIVE.