Date: 12/12/2017
Location: SCR 352

Votes: View-->	Action Taken:
I move a substitute motion to extend Rule 8-1-4 of I move to extend Rule 8-1-4 Sections 5 A., 5 B., 5 I move to extend Rule 8-1-4 Sections 5 A., 5 B., 5	FAIL FAIL

170133KRK.pdfDivision of Insurance Memo.pdf

09:25 AM -- Rules of the Commissioner of Insurance, Division of Insurance, Department of Regulatory Agencies, concerning Regulation 8-1-4 - title insurance - fiduciary duties, 3 CCR 702-8 (LLS Docket No. 170133; SOS Tracking No. 2016-00607)


09:25 AM -- Kip Kolkmeier, Staff Attorney, Office of Legislative Legal Services, testified before the Committee. Mr. Kolkmeier presented the Office's memorandum to the Committee concerning the contested rule issue from the Commissioner of Insurance and recommended that the rules listed in the memo not be extended. The rule places requirements on title insurance entities to comprehensively manage all of the funds that they come into possession of, including insurance premiums for title insurance. There is no statute in the title insurance code that relates to regulation of fiduciary funds by title insurance entities, so there is no statutory rule-making authority. There is statutory authority for the Commissioner to apply laws that govern insurance companies to title insurance companies. The rule does not govern just the funds of title insurance companies, however, but it governs the funds of all of their authorized agents and all affiliated entities. There are conflicts, inconsistencies, and lack of statutory authority issues in the rule, and therefore the rules should not be extended.

Representative Lee and Mr. Kolkmeier discussed how to deal with the fiduciary duties of title insurance companies and the sunset recommendations.

Representative Willett and Mr. Kolkmeier discussed the statutory authority and regulatory power to establish fiduciary duties for settlement companies.

Representative Foote and Mr. Kolkmeier discussed how certain aspects of the rule conflict with statute.

09:48 AM -- Marguerite Salazar, Commissioner of Insurance and Executive Director of the Department of Regulatory Agencies, testified before the Committee. The rule deals with one of the most important purchases people make in their lives and millions of dollars pass through these companies. The regulation has been in place for decades, and this issue has never come up. This authority to regulate this issue is critical, and the industry and consumer groups agree. The rule should be extended.

09:53 AM -- Mike Conway, Division of Insurance, Department of Regulatory Agencies, testified before the Committee. Mr. Conway cited multiple places in statute where the division sees statutory authority for this rule and the authority to regulate the business of insurance.

Senator Kagan and Ms. Salazar discussed whether there was any conversation about seeking legislation for the rule. Mr. Conway related that everybody working on the rule believed that there was statutory authority for the rule while they were working on promulgating it.

Senator Holbert and Mr. Conway discussed whether there is risk to consumers if the rule is not extended and whether there are requirements that suggest this rule should remain in place.

Senator Gardner and Mr. Conway discussed section 8 of the rule and the statutory grant of authority for the Commission to create a cause of action.

Representative Foote and Mr. Conway discussed the statutory authority Mr. Conway cited in his presentation for the rule. Representative Foote and Mr. Kolkmeier discussed the statutory authority that the division cited versus the lack of statutory authority that Mr. Kolkmeier presented.

Senator Holbert and Mr. Kolkmeier discussed how grants of authority already in statute could be expanded in possible legislation to allow for this rule.

Senator Cooke and Mr. Conway discussed the sections of the rule that the Office says are in conflict versus what the Division thinks may be in conflict.

Representative Willett, Mr. Conway, and Mr. Kolkmeier discussed whether there is a fiduciary duty on title insurance companies and their agents when they are providing settlement services in statute established through real estate, finance, or insurance law.

Senator Holbert and Mr. Conway discussed whether there is any law or regulation at the federal level that address this issue if the state rule is not extended.

Senator Kagan and Mr. Conway discussed the division's opinion on the statutory authority for fines or commissions of inquiry or any other civil penalties.

Representative Foote, Mr. Kolkmeier, and Mr. Conway discussed the difference between title insurance matters and title insurance settlement matters in terms of the statutory authority.

Representative Willett and Mr. Conway discussed where the division would be practically with their enforcement ability if only certain sections of the rule were not extended.

Senator Holbert asked what obligation the Committee has to act on this issue today and if they could defer action until after the legislative session.

10:37 AM -- Sharon Eubanks, Director, Office of Legislative Legal Services, testified before the Committee. Ms. Eubanks spoke to Senator Holbert's question by explaning the process of the Rule Review Bill and then saying that the rule would be extended by the bill unless listed as not to be extended. She also suggested that rules can be reviewed at out-of-cycle.

Senator Gardner and Ms. Eubanks discussed the options of the Committee with regard to the rule.

Senator Holbert stated that he understood the lack of authority for the rule but was concerned about consumer protection if the rule were not extended.

BILL:	Rules of the Commissioner of Insurance, Division of Insurance, Department of Regulatory Agencies, concerning Regulation 8-1-4 - title insurance - fiduciary duties, 3 CCR 702-8 (LLS Docket No. 170133; SOS Tracking No. 2016-00607)
TIME:	10:47:23 AM
MOVED:	Gardner
MOTION:	I move a substitute motion to extend Rule 8-1-4 Sections 5 J.3., and 8 of the rules of the Division of Insurance and ask for a no vote. The motion failed on a vote of 0-9.
SECONDED:
		VOTE
	Gardner	No
	Guzman	No
	Herod	No
	Holbert	No
	Kagan	No
	Lee	No
	Willett	No
	Wist	Excused
	Foote	No
	Cooke	No
Final YES: 0 NO: 9 EXC: 1 ABS: 0 REMOTE PARTICIPATION: 0 FINAL ACTION: FAIL

BILL:	Rules of the Commissioner of Insurance, Division of Insurance, Department of Regulatory Agencies, concerning Regulation 8-1-4 - title insurance - fiduciary duties, 3 CCR 702-8 (LLS Docket No. 170133; SOS Tracking No. 2016-00607)
TIME:	10:58:52 AM
MOVED:	Foote
MOTION:	I move to extend Rule 8-1-4 Sections 5 A., 5 B., 5 D., 5 F., 5 G., 5 I., 5 J.2.b., of the rules of the Division of Insurance and ask for a yes vote. A substitute motion was made and this motion was not voted upon.
SECONDED:
		VOTE
	Gardner
	Guzman
	Herod
	Holbert
	Kagan
	Lee
	Willett
	Wist	Excused
	Foote
	Cooke
Final YES: 0 NO: 0 EXC: 1 ABS: 0 REMOTE PARTICIPATION: 0 FINAL ACTION:

BILL:	Rules of the Commissioner of Insurance, Division of Insurance, Department of Regulatory Agencies, concerning Regulation 8-1-4 - title insurance - fiduciary duties, 3 CCR 702-8 (LLS Docket No. 170133; SOS Tracking No. 2016-00607)
TIME:	11:03:15 AM
MOVED:	Gardner
MOTION:	I move a substitute motion to extend Rule 8-1-4 of the rules of the Division of Insurance and ask for a no vote. The motion failed on a vote of 4-5.
SECONDED:
		VOTE
	Gardner	No
	Guzman	Yes
	Herod	Yes
	Holbert	No
	Kagan	No
	Lee	No
	Willett	No
	Wist	Excused
	Foote	Yes
	Cooke	Yes
Final YES: 4 NO: 5 EXC: 1 ABS: 0 REMOTE PARTICIPATION: 0 FINAL ACTION: FAIL