Both sides are claiming victory in a dispute over proposed regulations for the title insurance industry in California after the state Office of Administrative Law returned the regulations to the insurance department for clarification.

The proposed regulations would have established interim maximum rates and required title insurers to report their costs and operations, which would be the basis for more long-term maximum rates.

"The OAL's review effectively validates the department's authority to issue such regulations, but OAL has asked the department to make specific changes to clarify certain terms and eliminate certain ambiguities which OAL found," said State Insurance Commissioner Steve Poizner.

Mr. Poizner said his department will make clarifications, in consultation with industry and consumer groups, and resubmit the regulations.

"I am confident that they will be approved and that these important consumer-protection measures will go into effect," he commented.

However, Escrow Institute of California President P.J. Garcia praised the ruling as a "huge victory for the hundreds of small-business owners who dared to fight back against an abuse of power" by former insurance commissioner and current Lieutenant Governor John Garamendi, who initially proposed the regulations.

"It was clear from the beginning that former Commissioner Garamendi was attempting to besmirch the good name of licensed escrow companies just so he could score a few political points in an election year," Ms. Garcia said.

Mr. Garamendi, said Mr. Garcia, didn't "anticipate the determination of hundreds of escrow officers, a predominately woman-owned industry, to stand up to his bullying tactics and fight back with the truth about the escrow industry in California."

Action by the former commissioner followed investigations of the title industry in various states and in Congress which turned up evidence that title insurers were paying kickbacks to have business steered their way by developers and others.

Mr. Poizner said that, based on his own review, he agreed with his predecessor's views on the need for reform. Among the main reasons he noted is that while the costs of researching a title have come down through advances in technology, the prices for title insurance have significantly increased.

"I want to emphasize that I am a strong believer in the free market and am skeptical of price regulation," Mr. Poizner said. "But I am also a realist, and it is clear that where, as here, the market is not functioning properly, strong government action is necessary to protect the public."

Although he said he would "aggressively implement these regulations," Mr. Poizner added that he also intends to introduce structural reforms in the escrow market to induce competition.

"Consumers are entitled to a market in which they are sovereign," he said. "I am determined to make that the reality in the title and escrow markets."

Special Reports /

Calif. Title Insurance Regulations Nixed

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