The Office of General Counsel issued the following informal opinion on December 4, 2002, representing the position of the New York State Insurance Department.

Re: Title Insurance – Prohibited Rebates

Question Presented:

May a title insurance agent agree to donate a percentage of commissions to the charity of the insured’s choice?

Conclusion:

No. This would violate N.Y. Ins. Law § 6409(d) (McKinney 2000).

Facts:

No facts were presented. The inquiry is general in nature.

Analysis:

N.Y. Ins. Law § 6409(d) (McKinney 2000) provides:

No title insurance corporation or any other person acting for or on behalf of it, shall make any rebate of any portion of the fee, premium or charge made, or pay or give to any applicant for insurance, or to any person, firm, or corporation acting as agent, representative, attorney, or employee of the owner, lessee, mortgagee or the prospective owner, lessee, or mortgagee of the real property or any interest therein, either directly or indirectly, any commission, any part of its fees or charges, or any other consideration or valuable thing, as an inducement for, or as compensation for, any title insurance business. Any person or entity who accepts or receives such a commission or rebate shall be subject to a penalty equal to the greater of one thousand dollars or five times the amount thereof.

In an inquiry similar to the one presented here, the Department recognized that, although the insured would receive no direct benefit inasmuch as the commissions would be donated to charity, the very nature of the proposal would amount to an intangible benefit or consideration to a prospective insured to induce him to place his insurance through that agent.1 Irrespective of whether the charitable contribution was made in the insured’s name or in the title agent’s name, the proposed program constituted a prohibited rebate or inducement within the meaning of N.Y. Ins. Law § 6409(d) (McKinney 2000). As such, the proposal was found to violate the statute.

For further information you may contact Supervising Attorney Joan Siegel at the New York City Office.

1 Office of General Counsel Opinion 92-123.