An Express Article from the California Land Title Association
Bulletin 10/11-34 - October 12, 2010
The Office of Administrative Law (OAL) disapproved the California Department of Insurance’s (CDI) proposed loss indemnity regulations on Monday, October 4th. The reason cited was the proposed regulations’ failure to comply with the law’s Necessity standard.
Specifically, the OAL stated that the Department having a longstanding position or rule similar to the proposal is not evidence of the need for the regulation. Furthermore, the OAL noted, “there is no evidence in the Initial Statement of Reasons (ISOR) demonstrating that the current practices between UTCs and title insurers present a threat to the public, let alone to UTCs.”
The OAL disapproval stated that CDI statements that purport to provide necessity to implement the three purposes of the regulations – maintaining the solvency of the companies subject to the regulation, protecting the public by preventing fraud, and requiring fair dealing – were not supported by “facts, studies, expert opinion, or other information that appear to further the purposes of the Insurance Code section 12389.”
OAL cut its review of the regulations short after failing to find compliance with the law’s Necessity standard, and will withhold “judgment on the authority and consistency standards” until the explanation of the need for section 2194.70 is adequately supplemented.
The CDI may revisit the rulemaking process to correct the defect in the demonstration of necessity.