INSURANCE LAW STATUTE AND RELATED REGULATIONS WHICH PROHIBIT REAL PROPERTY TITLE INSURANCE COMPANIES FROM PROVIDING SPORTS TICKETS, MEALS AND OTHER ENTERTAINMENT TO SOLICIT BUSINESS FROM THOSE WHO USE THEIR SERVICES ARE VALID AND ENFORCEABLE (FIRST DEPT).

The First Department, reversing Supreme Court, in a full-fledged opinion by Justice Singh, determined that Insurance Law 6409 (d) was not ambiguous and the related regulations promulgated by the Department of Financial Services (DFS), with two exceptions, were valid. The statute and regulations deal with real property title insurance companies and prohibit the companies from soliciting business by providing sports tickets, meals and other entertainment to those who can use their services, including attorneys:

Following the investigation, DFS determined that some practices that resulted in higher premiums and closing costs for consumers, violate Insurance Law § 6409(d). DFS found that “insurers reported meal and entertainment expenses in the following categories: advertising, marketing and promotion, and travel, and other'” (Statement of Maria T. Vullo, Superintendent New York State DFS, Prepared for Delivery at Public Hearing: An Examination of Recent Title Insurance Regulation in New York, January 12, 2018) and expenses reported in the “other” category were “replete with excessive entertainment,” often including “wining and dining . . . of real estate professionals” (id.). For example, one insurer spent approximately $2.5 million to $5.4 million a year, amounting to about 5% to 14% of its charged premiums, on tickets to basketball, baseball, and tennis events for attorneys and other clients in a position to refer business to the insurer (id.). Some insurers paid for their clients to go to bars, strip clubs, and Hooters restaurants (id.). Insurers paid for “expensive designer goods” and “gift cards” for referral sources (id.). One insurer spent about 15% to 30% of premiums on entertainment and gifts for referral sources. Another insurer spent about 50% of its revenue on meals for referral sources. Insurers would report these expenses in the information submitted to DFS to support the premiums they charged (id.).

As a result of its investigation, DFS estimated that, on average, 5.3% of premiums charged statewide violated Insurance Law § 6409(d) from 2008 to 2012. To prevent such practices and to protect consumers from exorbitant costs, DFS promulgated Insurance Regulation 208. Matter of New York State Land Tit. Assn., Inc. v New York State Dept. of Fin. Servs.. 2019 NY Slip Op 00245, First Dept 1-15-19