Florida Butler Rebate
In Florida there is now an available rebate on title insurance commonly referred to as the Butler Rebate.
As a result of Butler, Florida title insurance rates are promulgated with respect to the underwriter’s portion of the total premium charge and negotiable with respect to the agents portion. For example, assume a situation where a consumer is given a Butler rebate and the transaction calls for the consumer to be given a reissue credit. If the consumer doesn’t receive it, the premium charged to the consumer could still fall below the rate permitted pursuant to the Florida promulgated rate scheme, but only to the extent of the agencies portion. In Florida, the agencies’ portion can be as high as 70% of the total risk rate premium set forth in the F.A.C. The underwriter, however, in a situation identical to the one quoted above would still collect from the consumer a premium (based on a 70% /30% split) in excess of what the regulations permit an industry to charge, which would constitute an unjust enrichment.
Finally, the Butler case delineates terms for a negotiated marketplace between title insurance agents and consumers with respect to the charge for the performance of primary title services. Essentially, these are private contracts between consumers and title insurance agents. The inescapable conclusion is that these transactions involve individual issues of peculiar matter with respect to the portion of the title insurance premium retained by the issuing agent.
HISTORY & EFFECTS:
The Butler Rebate refers to a Florida Supreme Court decision in 2000, Chicago Title Insurance Co., et al., Appellants, vs. S. Clark Butler, et al., Appellees. [October 19, 2000] Corrected Opinion PER CURIAM, which gave title insurance agents in Florida the ability to negotiate, or otherwise rebate, the portion of the split title insurance premium retained by them (70% agents/30% underwriter).
In essence, the Butler ruling declares certain anti-rebate statutes in Florida to be unconstitutional to the extent they prohibit a Florida title insurance agent from rebating a portion of the risk rate premium retained by the agent for services rendered (i.e., “Primary Title Services”) in connection with the issuance of title insurance policies. See Sec. 627.7711(b) Fla. Stat. Entitlement to any portion of the promulgated rate strictly depends on performance of these primary title services, or as HUD puts it, “core title services”.
HUD’s 1996 statement of policy (Title Insurance Practices In Florida) expresses the viewpoint that title insurance agents in Florida must perform all necessary core title services in order to qualify for the exemption under section 8(c)(1)(B). Payments of a fee by a title company (underwriter) to its duly appointed agent can only be made for services actually performed in the issuance of a policy of title insurance.
“Thus, as applied to practices in Florida, for a title insurance agent to be able to retain the maximum agency portion of the risk premium payment allowed under Florida law, the title insurance agent must actually perform “core title services,”.
“Core title services” are those basic services that a title insurance agent must actually perform for the payments from or retention of the title insurance premium to qualify for RESPA’s section 8(c)(1)(B) exemption for “payments by a title company to its duly appointed agent for services actually performed in the issuance of a policy of title insurance.” In performing core title services, the title insurance agent must be liable to his/her title insurance company for any negligence in performing the services.
In considering liability, HUD will examine the following type of indicia: the provisions of the agency contract, whether the agent has errors and omissions insurance or malpractice insurance, whether a contract provision regarding an agent’s liability for a loss is ever enforced, whether an agent is financially viable to pay a claim, and other factors the Secretary may consider relevant.
“Core title services” mean the following in Florida:
a. The examination and evaluation, based on relevant law and title insurance underwriting principles and guidelines, of the title evidence (as defined below) to determine the insurability of the title being examined, and what items to include and/or exclude in any title commitment and policy to be issued.
b. The preparation and issuance of the title commitment, or other document, that discloses the status of the title as it is proposed to be insured, identifies the conditions that must be met before the policy will be issued, and obligates the insurer to issue a policy of title insurance if such conditions are met.
c. The clearance of underwriting objections and the taking of those steps that are needed to satisfy any conditions to the issuance of the policies.
d. The preparation and issuance of the policy or policies of title insurance.
e. The handling of the closing or settlement, when it is customary for title insurance agents to provide such services and when the agent’s compensation for such services is customarily part of the payment or retention from the insurer.
See also: http://www.lenderspolicy.com/title-insurance/the-florida-butler-rebate-did-it/ ; Primary Title Services; Title Insurance Practices In Florida (HUD 1996 Statement Of Policy)
Other states (New York) stressing the need to perform Core Title Services:http://www.benchmarkta.com/news_items/NYSLTA_Partridge.pdf (New York State Land Title Association Guest Columnist. By Jean Partridge, Chief Counsel and Managing Member Benchmark Title Agency, LLC)