SECTIONS 12401-12401.10 - California Statutes

INSURANCE CODE

SECTION 12401-12401.10

12401. The purpose of this article is to promote the public welfare
by regulating rates for the business of title insurance as herein
provided to the end that they shall not be excessive, inadequate or
unfairly discriminatory. It is the express intent of this article to
permit and encourage competition between persons or entities engaged
in the business of title insurance on a sound financial basis, and
nothing in this article is intended to give the commissioner power to
fix and determine a rate level by classification or otherwise.

12401.1. Every title insurer, underwritten title company, and
controlled escrow company shall file with the commissioner its
schedules of rates, all regularly issued forms of title policies to
which such rates apply, and every modification thereof which it
proposes to use in this state. Every schedule of rates filed by a
title insurer shall set forth the entire charge to the public for
each type of title policy included within such schedule and shall
include without separate statement thereof that portion of the
charge, if any, which is based upon work performed by an underwritten
title company; there shall be no separate filing by an underwritten
title company for such work. Every filing shall set forth its
effective date, which shall be not earlier than the 30th day
following its receipt by the commissioner, and shall indicate the
character and extent of the coverages and services contemplated.

12401.2. Every title insurer, underwritten title company and
controlled escrow company shall establish basic classifications of
coverages and services to be used as the basis for determining rates.

12401.3. The following standards shall apply to the making and use
of rates pertaining to all the business of title insurance to which
the provisions of this article are applicable:
(a) Rates shall not be excessive or inadequate, as herein defined,
nor shall they be unfairly discriminatory.
No rate shall be held excessive unless (1) the rate is
unreasonably high for the insurance or other services provided, and
(2) a reasonable degree of competition does not exist in the
particular phase of the business of title insurance to which the rate
is applicable.
No rate shall be held to be inadequate unless (1) the rate is
unreasonably low for the insurance or other services provided and (2)
the continued use of the rate endangers the solvency of the person
or entity using it, or unless (3) the rate is unreasonably low for
the insurance or other services provided and the use of the rate by
the person or entity using it has, or if continued will have, the
effect of destroying competition or creating a monopoly. However, no
rate or rate classification shall be held to be inadequate for the
reason that a rate within a rating classification is less than the
cost of the risk and expense elements assigned to smaller insurances
within that classification, and the excess of the costs may be
charged against larger insurances within the classification without
rendering the rate or rate classification unfairly discriminatory.
(b) Consideration shall be given, to the extent applicable, to
past and prospective loss experience within and outside this state,
to a reasonable margin for profit and contingencies, to past and
prospective expenses both countrywide and those specially applicable
to this state, and to all other factors, including judgment factors,
deemed relevant within and outside this state.
(c) The systems of expense provisions included in the rates for
use by any title insurer, underwritten title company, or controlled
escrow company may differ from those of other title insurers,
underwritten title companies, or controlled escrow companies to
reflect the operating methods of the person or entity with respect to
any kind of insurance, or other service, or with respect to any
combination thereof.
(d) For the establishment of rates, risks, and services in the
business of title insurance may be grouped by classifications into
the various types of title policies or services offered. The
classifications may be further divided to produce rates for
individual risks or services within a classification. Those
classifications or further divisions thereof may be established based
upon any one or more of the following: (1) the size of a transaction
and its effect upon the continuing solvency of the person or entity
using the rate in question if a loss should occur; (2) expense
elements, including the management time that would ordinarily be
expended in a typical transaction of a particular size; (3) the
geographic location of a transaction, including variations in risk
and expense elements attributable thereto; (4) the individual
experience of the person or entity using the rate in question; and
(5) any other reasonable considerations. Those classifications or
further divisions thereof shall apply to all risks and services in
the business of title insurance under the same or under substantially
the same circumstances or conditions.

12401.4. In order to further uniform administration of rate
regulatory laws, the commissioner and every person or entity in the
business of title insurance and every advisory organization in this
state may exchange information and experience data with insurance
supervisory officials of this and other states and rating
organizations in other states and may consult with them with respect
to such information and data.

12401.5. As a further aid to uniform administration of rate
regulatory laws of this state, the commissioner may prescribe by
reasonable rules and regulations:
(a) For the annual reporting of financial data relating to the
aggregate economic performance of all title insurance entities
conducting the business of title insurance in this state. That data,
if required, shall be for the purpose of determining the industry
financial experience for the reporting year and shall reflect the
after-tax rate of return on total capital, including investment
income and realized and unrealized capital gains, from whatever
source attributable to operations in this state.
(b) A statistical plan, reasonably adapted to each of the rating
systems in use within the state. Any plan may be modified from time
to time by the commissioner and shall be used thereafter by each
title insurer in the reporting of data required by the plan, so that
the experience of all title insurers is available to the commissioner
on an annual basis. The commissioner, through regulations, shall
prescribe the form and detail of the financial data to be submitted
and the time period the data shall cover. In promulgating the plan,
the commissioner may give due consideration to the rating systems in
use and, in order that the plan may be as uniform as is practicable
among the several states, to the rules and to the form of the plan
used for these rating systems in other states. Every licensed title
insurer in the state shall be required to record and report data
directly to the commissioner. The commissioner shall designate one or
more advisory organizations to assist in the development of the
statistical plan and to further assist in gathering data and making
compilations thereof, and these compilations shall be made available,
subject to reasonable rules adopted by the commissioner, to title
insurers and advisory organizations.
(c) No statistical plan or modifications thereto, or rules or
regulations pertaining thereto, shall be adopted or implemented
absent compliance with the provisions of Article 5 (commencing with
Section 11346) of Chapter 3.5 of Part 1 of Division 3 of Title 2 of
the Government Code, except that any plan, rule, or regulation shall
not become effective for a period of 120 days following its adoption,
and any plan, rule, or regulation shall be deemed to be a regulation
required to be filed with the Secretary of State for purposes of
Article 5 (commencing with Section 11346) of Chapter 3.5 of Part 1 of
Division 3 of Title 2 of the Government Code.
(d) Data gathered under the statistical plan may be used in
conjunction with analytical input from an industry advisory
organization to generate statistical information for use in reviewing
and evaluating individual rate filings by title insurers pursuant to
the standards set forth in Section 12401.3. However, no statistical
plan or modifications thereto, or rules or regulations pertaining
thereto, shall do any of the following:
(1) Serve as the basis for an assessment not otherwise authorized
by law.
(2) Conflict with the purpose and express intent of Section 12401.
(3) Fix, determine, or in any way impair competitive rating or the
free market.
(e) This section shall not require a title insurer to refile an
existing rate. However, this section shall apply to the filing of a
changed or otherwise modified rate, pursuant to the regulations
adopted to implement this chapter.

12401.6. Nothing in this article shall be construed to prohibit
concert of action between entities under the same general management
and control.

12401.7. No title insurer, underwritten title company or controlled
escrow company shall use any rate in the business of title insurance
prior to its effective date nor prior to the filing with respect to
such rate having been publicly displayed and made readily available
to the public for a period of no less than 30 days in each office of
the title insurer, underwritten title company, or controlled escrow
company in the county to which such rate applies, and no rate
increase shall apply to title policies or services which have been
contracted for prior to such effective date.

12401.71. (a) Notwithstanding Sections 12401.1 and 12401.7, a title
insurer, underwritten title company, or controlled escrow company
may use a new rate prior to 30 days after the filing if the new rate
results in a reduction from an existing rate, the earlier effective
date is set forth in the filing, and the new rate has been publicly
displayed and made readily available to the public prior to its
effective date.
(b) Any rate reduction filed by a title insurer, underwritten
title company, or controlled escrow company pursuant to subdivision
(a) shall be subject to the authority of the commissioner as set
forth in this article and Article 6.7 (commencing with Section
12414.13).
(c) Five years from the effective date of this section, and within
existing resources, the department shall review the reduced rates
authorized by this section to determine if they are inadequate or if
they increase the possibility of title insurers becoming insolvent.
This review shall be in addition to any other authorized by statute.

12401.8. Charges in excess of those set forth in a rate filing
which has become effective may be made when such filing includes a
statement that such charges may be made in the event unusual
insurance risks are assumed or unusual services performed in the
transaction of the business of title insurance; provided, that such
charges are reasonably commensurate with the risks assumed or the
costs of the services performed and provided further that each person
or entity obligated to pay all or any part of such charges consents
thereto in writing in advance.

12401.9. The schedules of rates which are required to be filed with
the commissioner under the provisions of Section 12401.1 shall be
printed or typed in type not smaller than 10-point and, so long as
they are effective, full copies thereof, showing their effective date
or dates, shall be kept at all times available to the public and
prominently displayed in a public place in each office of a title
insurer, an underwritten title company and a controlled escrow
company in the county to which such rates apply. On request, copies
of such schedules or adequate summaries of the pertinent part or
parts thereof shall be furnished to the public.

12401.10. Nothing in this article shall require the filing of rates
by title insurers for reinsurance contracts or agreements or
policies of excess coinsurance.