04/05/2002 03:25 PM House L&C
| Audio | Topic |
|---|
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
April 5, 2002
3:25 p.m.
MEMBERS PRESENT
Representative Lisa Murkowski, Chair
Representative Kevin Meyer
Representative Pete Kott
Representative Norman Rokeberg
Representative Harry Crawford
Representative Joe Hayes
MEMBERS ABSENT
Representative Andrew Halcro, Vice Chair
COMMITTEE CALENDAR
CS FOR SENATE BILL NO. 243(FIN)
"An Act extending the termination date of the Board of
Chiropractic Examiners; and relating to chiropractors."
- MOVED CSSB 243(FIN) OUT OF COMMITTEE
HOUSE JOINT RESOLUTION NO. 38
Relating to urging the United States Congress to pass the
Terrorism Risk Protection Act.
- MOVED CSHJR 38(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 424
"An Act relating to title insurance; and providing for an
effective date."
- HEARD AND HELD
PREVIOUS ACTION
BILL: SB 243
SHORT TITLE:CHIROPRACTORS: SUNSET/LICENSING
SPONSOR(S): SENATOR(S) THERRIAULT, TAYLOR, AUSTERMAN
Jrn-Date Jrn-Page Action
01/16/02 1962 (S) READ THE FIRST TIME -
REFERRALS
01/16/02 1962 (S) L&C
01/31/02 (S) L&C AT 1:30 PM BELTZ 211
01/31/02 (S) Moved Out of Committee
01/31/02 (S) MINUTE(L&C)
02/01/02 2082 (S) L&C RPT 4DP
02/01/02 2082 (S) DP: STEVENS, AUSTERMAN,
DAVIS, LEMAN
02/01/02 2082 (S) FN1: (CED)
02/01/02 2082 (S) FIN REFERRAL ADDED AFTER L&C
02/12/02 (S) FIN AT 9:30 AM SENATE FINANCE
532
02/12/02 (S) Heard & Held
02/12/02 (S) MINUTE(FIN)
02/28/02 (S) FIN AT 9:00 AM SENATE FINANCE
532
02/28/02 (S) Scheduled But Not Heard
03/05/02 (S) FIN AT 4:00 PM SENATE FINANCE
532
03/05/02 (S) Moved Out of Committee
MINUTE(FIN)
03/06/02 2383 (S) FIN RPT CS 7DP 1NR SAME TITLE
03/06/02 2383 (S) DP: DONLEY, KELLY, GREEN,
LEMAN,
03/06/02 2383 (S) WILKEN, OLSON, WARD; NR:
HOFFMAN
03/06/02 2383 (S) FN1: (CED)
03/14/02 (S) RLS AT 11:00 AM FAHRENKAMP
203
03/14/02 (S) MINUTE(RLS)
03/20/02 2473 (S) RULES TO CALENDAR 3/20/02
03/20/02 2473 (S) READ THE SECOND TIME
03/20/02 2474 (S) FIN CS ADOPTED UNAN CONSENT
03/20/02 2474 (S) ADVANCED TO THIRD READING
UNAN CONSENT
03/20/02 2474 (S) READ THE THIRD TIME CSSB
243(FIN)
03/20/02 2474 (S) PASSED Y15 N- E4 A1
03/20/02 2477 (S) TRANSMITTED TO (H)
03/20/02 2477 (S) VERSION: CSSB 243(FIN)
03/22/02 2635 (H) READ THE FIRST TIME -
REFERRALS
03/22/02 2635 (H) L&C, FIN
04/05/02 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HJR 38
SHORT TITLE:TERRORISM RISK PROTECTION ACT
SPONSOR(S): REPRESENTATIVE(S)HAYES
Jrn-Date Jrn-Page Action
02/11/02 2204 (H) READ THE FIRST TIME -
REFERRALS
02/11/02 2204 (H) L&C
03/25/02 (H) L&C AT 3:15 PM CAPITOL 17
03/25/02 (H) <Bill Postponed>
04/01/02 (H) L&C AT 3:15 PM CAPITOL 17
04/01/02 (H) Scheduled But Not Heard
04/05/02 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 424
SHORT TITLE:TITLE INSURANCE PLANTS
SPONSOR(S): JUDICIARY
Jrn-Date Jrn-Page Action
02/13/02 2246 (H) READ THE FIRST TIME -
REFERRALS
02/13/02 2246 (H) L&C
02/13/02 2246 (H) REFERRED TO LABOR & COMMERCE
04/05/02 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
HEATHER BRAKES, Staff
to Senator Gene Therriault
Joint Committee on Legislative Budget & Audit
Alaska State Legislature
Capitol Building, Room 121
Juneau, Alaska 99801
POSITION STATEMENT: Testified on behalf of the sponsor of SB
243, the Joint Committee on Legislative Budget & Audit.
PAT DAVIDSON, Legislative Auditor
Legislative Audit Division
Alaska State Legislature
PO Box 113300
Juneau, Alaska 99811-3300
POSITION STATEMENT: Answered questions in regard to the audit
relating to the Board of Chiropractic Examiners Sunset Review.
CATHERINE REARDON, Director
Division of Occupational Licensing
Department of Community & Economic Development (DCED)
PO Box 110806
Juneau, Alaska 99811-0806
POSITION STATEMENT: Testified in support of [CSSB 243(FIN)].
CODY RICE, Intern
for Representative Joe Hayes
Alaska State Legislature
Capitol Building, Room 422
Juneau, Alaska 99801
POSITION STATEMENT: Testified on behalf of the sponsor of HJR
38.
BOB LOHR, Director
Division of Insurance
Department of Community & Economic Development (DCED)
3601 C Street, Suite 1324
Anchorage, Alaska 99503-5948
POSITION STATEMENT: Testified that the division is in support
of HJR 38. In regard to HB 424, chronicled the steps leading to
the pending hearing and testified as to the process of review
for title plants.
BRYAN MERRELL, State Counsel and Underwriter
First American Title Insurance Company;
Vice President, Alaska Land Title Association
3035 "C" Street
Anchorage, Alaska 99503
POSITION STATEMENT: Testified in support of HB 424.
PATRICK LAMB, President
Attorneys Title Guaranty Agency,
Attorneys Title Guaranty Services
3501 Denali Street, Suite 205
Anchorage, Alaska 99503
POSITION STATEMENT: Testified as to the use of the public
records in title searches.
SARAH McNAIR-GROVE, Actuary P/C
Division of Insurance
Department of Community & Economic Development
PO Box 110805
Juneau, Alaska 99811-0805
POSITION STATEMENT: Testified that to the extent HB 424
clarifies issues [related to title plants], the division thinks
the legislation is appropriate. However, the division believes
HB 424 goes beyond fixing some of the issues.
BARB NORD, Chair
Issues Committee
Kenai Association of Realtors
690 Sycamore Circle
Kenai, Alaska 99669
POSITION STATEMENT: Testified in support of HB 424.
MICHAEL PRICE, Owner
Mat-Su Title Agency
951 E Bogard Road
Wasilla, Alaska State Legislature
POSITION STATEMENT: Testified in support of HB 424.
CHRIS RODRIGUEZ
Alaska Land Title Association
(No address provided)
POSITION STATEMENT: Testified in support of HB 424.
TERRY BRYANT, President
First American Title of Alaska
(No address provided)
POSITION STATEMENT: Testified on HB 424.
KIRK WICKERSHAM, Owner
Attorneys Title Guaranty Agency;
Attorney for Attorneys Title Guaranty Services
3501 Denali Suite 205
Anchorage, Alaska 99503
POSITION STATEMENT: Proposed substitue language for HB 424,
which he characterized as legislation to put ATGS out of
business.
ACTION NARRATIVE
TAPE 02-50, SIDE A
Number 0001
CHAIR LISA MURKOWSKI called the House Labor and Commerce
Standing Committee meeting to order at 3:25 p.m.
Representatives Murkowski, Kott, Rokeberg, Crawford, and Hayes
were present at the call to order. Representative Meyer arrived
as the meeting was in progress.
SB 243-CHIROPRACTORS: SUNSET/LICENSING
CHAIR MURKOWSKI announced that the first order of business would
be CS FOR SENATE BILL NO. 243(FIN), "An Act extending the
termination date of the Board of Chiropractic Examiners; and
relating to chiropractors."
Number 0084
HEATHER BRAKES, Staff to Senator Gene Therriault, Joint
Committee on Legislative Budget & Audit, Alaska State
Legislature, testified on behalf of the sponsor of SB 243, Joint
Committee on Legislative Budget & Audit. Ms. Brakes explained
that SB 243 was drafted based on an audit report released by the
Joint Committee on Legislative Budget & Audit on December 5,
2001. Section 1 extends the termination date of the Board of
Chiropractic Examiners from June 30, 2002, to June 30, 2006,
which is the standard four-year extension. Section 2 restores
the board's authority to license by credentials. Ms. Brakes
pointed out that the committee packet should include the audit
report. She directed the committee's attention to page 5 of the
audit report, which is entitled "Report Conclusions". In that
section the auditor, in part, stated:
In our opinion, the Board of Chiropractic Examiners is
operating in an efficient and effective manner and
should continue to regulate and license chiropractors.
We believe the board is serving the public interest by
promoting competence and integrity of individuals
holding themselves out to the public as chiropractors.
The Board of Chiropractic Examiners serves a public
purpose by promoting the competent and safe practice
of chiropractic therapy. The board does this through
establishing standards for licensed professionals and
monitoring the manner in which they practice. The
board has carried out these responsibilities
satisfactorily.
MS. BRAKES explained that based on the above, the auditors
recommended the board be extended for four years. Furthermore,
the auditors recommended, on page 7 of the audit report, to
restore the board's statutory authority to license professionals
by credentials [and thus] expanding opportunities for licensure
by experienced professionals from out of state.
CHAIR MURKOWSKI turned to Recommendation No. 2 of the audit that
suggests that the governor expedite the appointment of vacant
and expired board member positions. Currently, it appears that
there are five board members [a full slate] and thus she asked
if the suggestion mentioned in Recommendation No. 2 had been
addressed recently.
Number 0310
PAT DAVIDSON, Legislative Auditor, Legislative Audit Division,
Alaska State Legislature, answered that as of June 30, 2001, the
Board of Chiropractic Examiners does have a full slate of
members. However, the lag time between when members had
resigned and the time of appointment was of concern.
CHAIR MURKOWSKI asked if these latest appointments addressed the
audit's concern regarding the need for more representation from
small rural areas, which was mentioned in Recommendation No. 2.
MS. DAVIDSON said that is still of concern and thus the
recommendation would stand.
Number 0390
CATHERINE REARDON, Director, Division of Occupational Licensing,
Department of Community & Economic Development (DCED), testified
in support of [CSSB 243(FIN)]. Ms. Reardon informed the
committee that the current board consists of one member from
each of the following communities: Ketchikan, Fairbanks,
Juneau, Anchorage, and Eagle River. Although the board
currently has good geographic distribution, she acknowledged
that such geographic distribution hasn't always been the case.
CHAIR MURKOWSKI turned to the issue of licensure by credential
and asked if the changes in the legislation would address the
licensure issues that were of concern.
MS. REARDON replied yes, and explained that there was a fair
amount of work on that issue in the Senate. The current version
of the bill is supported by the Board of Chiropractic Examiners.
It also appears that the chiropractic community supports [CSSB
243(FIN)] as well.
Number 0469
REPRESENTATIVE KOTT moved to report [CSSB 243(FIN)] out of
committee with individual recommendations and the accompanying
fiscal notes. There being no objection, [CSSB 243(FIN)] was
reported from the House Labor and Commerce Standing Committee.
HJR 38-TERRORISM RISK PROTECTION ACT
CHAIR MURKOWSKI announced that the next order of business would
be House Joint Resolution No. 38, Relating to urging the united
states congress to pass the terrorism risk protection act.
Number 0553
CODY RICE, Intern for Representative Joe Hayes, Alaska State
Legislature, explained that HJR 38 urges Congress to pass H.R.
3210, the Terrorism Risk Protection Act, which will create a
backstop for potential losses in the event of a future national
disaster, terrorist attack, or other large scale financial
calamity. The [Act] will ensure that the losses sustained in
the aforementioned events wouldn't be transferred to primary
insurers and thus down to the policyholders. In response to
Chair Murkowski, Mr. Rice informed the committee that H.R. 3210
is in the U.S. Senate Financial Services Committee where
deliberations are revolving around [including] tort reform.
Number 0716
BOB LOHR, Director, Division of Insurance, Department of
Community & Economic Development (DCED), testified via
teleconference. He announced the division's support of HJR 38.
Mr. Lohr noted appreciation for the committee's interest and
concern in regard to the effects of the events of September 11th
on Alaska's insurance market. Furthermore, Mr. Lohr noted
appreciation for the committee's support in urging Congress to
consider how it might help stabilize the insurance market. This
resolution, HJR 38, is timely since President George W. Bush is
scheduled to address the U.S. Senate in regard to the need for
terrorism insurance on Monday.
MR. LOHR informed the committee that February 27th the
Subcommittee on Oversight and Investigations of the Committee on
Financial Services, held a hearing to access how the market is
reacting to issues related to terrorism insurance coverage. At
this hearing, the General Accounting Office (GAO) prepared a
report describing how, in the absence of federal legislation,
insurance companies and the market place have reacted to the
events of September 11th. This report points out that insurers
and reinsurers are withdrawing from the market. Since this has
been occurring gradually, the economic consequences are unclear.
The report summarizes the situation as follows:
The ultimate scope of these effects is uncertain at
this time, but they could become potentially
significant in an economy recovering from a recession.
Deciding whether Congress should act to help
businesses obtain insurance against losses caused by
terrorism is properly a matter of public policy.
Consequences of continued inaction, however, may be
real and are potentially large.
MR. LOHR pointed out that Alan Greenspan, the National Football
League, and the Risk Manager for the U.S. Olympic Committee has
expressed support for the federal backstop legislation.
Entities that have experienced difficulties in obtaining
coverage or for an affordable price include the Mall of America,
the Golden Gate Bridge, a large Manhattan real estate deal, and
Alaska domesticated insurance carriers. Therefore, Mr. Lohr
said that HJR 38 is a good resolution and thus he urges the
committee's support. However, he noted that he would recommend
a couple of amendments that speak to the congressional process.
Number 0897
CHAIR MURKOWSKI noted that the committee packet includes a
letter from Mr. Lohr to Senator Stevens, which essentially urges
quick action on this matter. The letter points out that
"reinsurance contract renewals are now being renegotiated for an
effective date of January 1, 2002." The letter also expresses
concern [with the impact] that the renewal of the reinsurance
contracts will have in Alaska. Although this is a gradual
effect, Chair Murkowski asked if Mr. Lohr has noticed anything
precipitous as the reinsurance contracts are renewed.
MR. LOHR said, "The sky didn't fall January 1st." Last fall,
the insurance industry, many trade associations, and consumers
and bankers made a concerted effort to say why this [federal]
legislation was important. However, the actual effects have
been subtle and thus there was concern that the [federal
legislation] might languish. Mr. Lohr related his belief that
with the President's renewed interest in this issue, the U.S.
Senate will probably be more attentive to doing something with
[H.R. 3210].
CHAIR MURKOWSKI surmised then that Alaska isn't in as serious
shape as Mr. Lohr had anticipated.
MR. LOHR answered, "I think that the jury is still out on that
one." He pointed out that currently [the division] is
considering rate increase requests from Alaska-based insurers
that are almost entirely based on the dramatic increase in
terrorism coverage. Therefore, he said he didn't believe that
the market has yet seen the impact of that. "If approved, the
rate increase request would have a significant effect on the
workers' compensation market. And there is tangible indication
of what's going on with respect to terrorism coverage in Alaska
and its increased cost," he explained. He noted that how to
handle the aforementioned as a regulatory rate making matter is
debated. In response to Representative Kott, Mr. Lohr didn't
know the specific time the President will speak on this matter
and thus he offered to find out and inform the committee.
CHAIR MURKOWSKI announced that no one else had signed up to
testify on HJR 38. Therefore, she turned to the technical
amendments Mr. Lohr had mentioned.
REPRESENTATIVE KOTT inquired as to why the resolution included
in the committee packet doesn't have a number.
The committee took a brief at-ease from 3:42 p.m. to 3:43 p.m.
CHAIR MURKOWSKI clarified that [the numbered version of HJR 38]
is the same as the unnumbered version in the committee packet.
Number 1132
MR. LOHR explained that the resolution focuses on H.R. 3210 and
support of H.R. 3210 could be controversial simply because of
the latitude left to the other body in shaping the bill. One
approach would be to amend the title to say, "Relating to urging
the United States Congress to pass terrorism risk protection
legislation." Furthermore, the two specific references to "H.R.
3210, the Terrorism Risk Protection Act" on page 1, lines 4-5,
should be deleted and replaced with "terrorism risk protection
legislation". Similarly, on page 2, line 14, the text "H.R.
3210, the Terrorism Risk Protection Act" should be replaced by
"terrorism risk protection legislation". Therefore, the
recommendation in HJR 38 would be generic and leave it to the
[U.S. Senate] as to the particular form of the legislation. Mr.
Lohr mentioned that H.R. 3210 contains some "quirks" that the
U.S. Senate might or might not agree with in the course of the
congressional process.
REPRESENTATIVE HAYES announced that he would accept Mr. Lohr's
recommendations as friendly amendments.
Number 1241
REPRESENTATIVE HAYES moved that the committee adopt Mr. Lohr's
aforementioned technical amendments to page 1, line 4; page 1,
lines 1 and 2; page 2, line 14, to conform the language to urge
passage of "terrorism risk protection legislation".
REPRESENTATIVE KOTT objected. He asked whether there is any
other legislation pending in Congress that addresses the subject
matter [addressed in H.R. 3210].
REPRESENTATIVE HAYES answered that he didn't believe so.
Representative Hayes related his belief that if H.R. 3210
reaches the conference committee stage, the U.S. House of
Representatives has latitude that far exceeds "our" latitude.
Therefore, changes that exceed the structure for the Alaska
State Legislature could occur at that point in the process.
REPRESENTATIVE KOTT remarked that he prefers to provide specific
guidance to Congress. If H.R. 3210 is the only legislation that
addresses the issue, then it will be the vehicle. Therefore,
Representative Kott didn't see any reason to eliminate the
reference to "H.R. 3210" in HJR 38.
Number 1338
CHAIR MURKOWSKI suggested that the first "WHEREAS" read as
follows: "WHEREAS the United States House of Representatives
has passed H.R. 3210, the Terrorism Risk Protection Act; and the
United States Senate is considering terrorism risk protection
legislation;". She asked if the aforementioned language, with
the other changes recommended by Mr. Lohr, as well as the title
change would address Representative Kott's concern.
REPRESENTATIVE KOTT replied that it would be acceptable. He
expressed the need for the [U.S.] Senate to be able to know the
vehicle for which the resolution urges support.
MR. LOHR informed the committee of his belief that there has
been a turf war in the [U.S.] Senate in regard to which
committee has jurisdiction. Furthermore, he reiterated that the
U.S. House version of [H.R. 3210] attempted to include tort
reform. Mr. Lohr said that the approach by Chair Murkowski
would work.
REPRESENTATIVE HAYES, in response to Chair Murkowski, said that
he would accept Chair Murkowski's suggestion for the first
"WHEREAS" clause.
REPRESENTATIVE KOTT withdrew his objection.
CHAIR MURKOWSKI clarified the amendment. The first "WHEREAS"
clause would read as follows: "WHEREAS the United States House
of Representatives has passed H.R. 3210, the Terrorism Risk
Protection Act; and WHEREAS the United States Senate is
considering terrorism risk protection legislation;". The
amendment would also [replace "the Terrorism Risk Protection
Act" language with "terrorism risk legislation"] and incorporate
the recommendations by Mr. Lohr to change the title and page 2,
line 14. There being no objection, the amendment was adopted.
Number 1517
REPRESENTATIVE MEYER moved to report HJR 38, as amended,HJH out
of committee with individual recommendations and the
accompanying zero fiscal note.
REPRESENTATIVE HAYES announced a conflict of interest because he
works in the insurance industry.
CHAIR MURKOWSKI asked if there was any objection to moving HJR
38 as amended from committee. There being no objection, CSHJR
38(L&C) was reported from the House Labor and Commerce Standing
Committee.
HB 424-TITLE INSURANCE PLANTS
Number 1580
CHAIR MURKOWSKI announced that the final order of business would
be HOUSE BILL NO. 424, "An Act relating to title insurance; and
providing for an effective date."
Number 1596
REPRESENTATIVE ROKEBERG, Chair, House Judiciary Standing
Committee, Alaska State Legislature, testified on behalf of the
bill sponsor, the House Judiciary Standing Committee.
Representative Rokeberg informed the committee that this
situation was brought to his attention by the Land Title
Association and the legislation was introduced at their request.
He explained that a lawsuit was filed against the government in
order to get the government to enforce their regulations. The
[Land Title Association] had reason to believe that the Division
of Insurance wasn't enforcing its statutes and regulations.
This legislation increases the amount of time information
mandated by statute to be kept by a title insurance company from
25 years to 40 years. The legislation also includes a "title
insurance limited producer", which is defined in statute as
basically an agent not a title insurance underwriter.
Representative Rokeberg directed attention to page 2, line 3,
where the language "from public records or" is deleted. That
language has created some ambiguity in its interpretation.
REPRESENTATIVE ROKEBERG turned attention to page 1, Section 1,
AS 21.66.200, which establishes the provisions under which a
title insurance company under current statutes shall have a
title plant in this state. In Section 2, AS 21.66.210, allows
for two or more title companies to combine to form a joint title
plant. There was concern with regard to the public records
language that was [originally] included in [AS 21.66.210].
Representative Rokeberg characterized [the original language] of
the statutes to be inconsistent because it would seem that a
title company would need a title plant while a joint title plant
wouldn't have to have a title plant but rather could use the
recorder's office. The latter is the interpretation of the new
firm [involved in the aforementioned lawsuit].
REPRESENTATIVE ROKEBERG pointed out that the committee packet
should include an opinion from Assistant Attorney General Signe
P. Andersen to which is attached an April 5, 2002, memorandum
from Heather Nobrega, Staff to the House Judiciary Standing
Committee. Representative Rokeberg paraphrased from Ms.
Nobrega's memorandum, which reads as follows:
Signe's memo [addresses] two statutes:
AS 21.66.200. Title Plant Requirements
This statute lists the requirements for a title
plant.
AS 21.66.210. Joint Plant Companies
This statute is an organizing statute that lists
what must be done to create a joint title plant. It
does not reach the content of the plant.
Signe: It does not amend, abridge, or create an
exception to the content requirements for title plants
imposed on insurers in AS 21.66.200.
The bottom line:
Signe concludes that any title plant in Alaska
must meet the content requirements of AS 21.66.200 to
satisfy a title insurer's requirements under AS
21.66.200. AS 21.66.210 should be [viewed] as an
organizing statute that does not reach the content of
the plant.
In addition, Signe states that she does not
believe the phrase "from public records or from
records owned by the entity" is intended to permit
alternative methods for operating a title plant that
are different from the standards expressed in AS
21.66.200.
REPRESENTATIVE ROKEBERG noted that the committee packet should
also include an e-mail from Sharon Young, State Recorder,
Division of Support Services, Department of Natural Resources.
Per Representative Rokeberg's request Ms. Young's e-mail
outlines the problems with using the recorder's office for a
title plant.
Number 2009
CHAIR MURKOWSKI pointed out that the legislation has an
immediate effective date and the requirement to have information
from the past 40 years. She questioned how that could be
accomplished.
REPRESENTATIVE KOTT inquired as to the status of the pending
litigation.
REPRESENTATIVE ROKEBERG answered that he couldn't inform the
committee of the status of the litigation. Representative
Rokeberg noted that he is a "free enterprise guy." However, the
title insurance industry is so regulated that each company has
to charge the same rate. Therefore, everyone entering the field
should have the same capital investments and barriers to entry.
"Other than that, we should deregulate it all together," he
said.
Number 2116
REPRESENTATIVE CRAWFORD estimated that changing the requirement
from 25 years to 40 years would create more of an expense, which
would be passed along to the consumer. He questioned why [the
legislature] would want to have extra requirements in Alaska.
REPRESENTATIVE ROKEBERG stressed that the fundamental purpose of
the regulation is consumer protection. With regard to the
costs, it's a result of the regulatory and statutory scheme. In
regards to the litigation, Representative Rokeberg explained
that the company being sued is using the recorder's office.
Number 2250
BRYAN MERRELL, State Counsel and Underwriter, First American
Title Insurance Company; Vice President, Alaska Land Title
Association, testified via teleconference. He informed the
committee that First American Title Insurance Company, an
underwriter of title insurance, has been underwriting title
insurance since 1965. He noted that he was involve in writing
HB 424. Mr. Merrell explained that the requirement to have the
title plant records for 40 years merely brings the statute to
the reality of what the title plant owners in Alaska already
have. In order to do a thorough search one would want to have
records far enough back. If a search was done only for 25
years, one might not catch the typical 30-year mortgage. Mr.
Merrell related his understanding that the trend is toward
having title plant requirements [as specified in HB 424]. Laws
in the Northwest require at least 40 years of records.
Requiring keeping records [for 40 years] protects the public.
With regard to allowing agents or underwriters to own the title
plants, this legislation clarifies that as it is the general
practice.
MR. MERRELL turned to the requirements for a joint title plant
and noted agreement with Representative Rokeberg that a single
owner plant and a joint owner plant should face the same
requirements. Mr. Merrell related his belief that the statutes
already say that because of the language defining a title plant
in [AS 21.66].200. Furthermore, the Division of Insurance
believes this to be the case as well, which is why it issued the
cease and desist order [to the company in litigation].
TAPE 02-50, SIDE B
MR. MERRELL recalled that the Director of the Division of
Insurance had testified before this committee in February and
indicated that the public records language of this statute may
need clarification. That comment was the impetus for adding
that into the legislation.
MR. MERRELL turned to comments that this legislation is anti-
competitive and protective of the industry and charged, rather,
that this legislation is protective of the public. Clearly, a
proper title search can't be done using the records from the
recorder's office as is evidenced on the website for the
recorder's office. He informed the committee that prior to the
litigation there had been discussion regarding increasing the
number of years of records. The other changed encompassed in
the legislation arose after the litigation came forward. Mr.
Merrell related his understanding that a fiscal note had been
attached to the legislation, which he didn't understand.
REPRESENTATIVE ROKEBERG interjected that the fiscal note had
been zeroed out.
Number 2254
MR. MERRELL addressed the comment that this [legislation] will
result in higher rates by pointing out that the rates are a
separate issue. The increase in the number of years of records
shouldn't impact the rates because these are records that
everyone has or can easily obtain an index. In fact, using the
inadequate information from the recorder's office could give
rise to higher rates because of the potential claims related to
the use of inadequate records. Using properly indexed, easily
searchable title plants is a much better method to keep costs
down rather than using the records from the recorder's office.
Mr. Merrell informed the committee that the division is in the
process of reviewing the rates and claims of [First Title
Insurance Company]. Only through such a detailed, factually
driven statistical analysis can one develop a proper methodology
for determining the rate.
Number 2197
CHAIR MURKOWSKI returned to the 40-year requirement for the
title plant. She inquired as to how a title plant would obtain
the records dating back to statehood.
MR. MERRELL explained that when building a title plant, people
actually review the documents in order to ensure that the
documents are indexed with the proper names and tracts of real
property. Essentially, a trained individual would have a stack
of papers of everything that has been recorded and go through
those documents and file and index them either on computer or in
a paper plant. Sure, the documents recorded in the public
record are used, but the public indexes aren't being used alone.
The documents are being carefully reviewed in order to ensure
proper indexing. Mr. Merrell pointed out that the research of
the state recorder's office hasn't been as accurate as that of a
title company's research.
CHAIR MURKOWSKI returned to the fiscal note and highlighted that
there are ten physical title plants in Alaska. She inquired as
to what would be done in those communities that don't have a
physical title plant.
MR. MERRELL said that he didn't believe that number to be
accurate because it depends upon how one would count the number
of title plants. All of the recording districts in the state
have at least one title company that has created a title plant
with records and data that it has indexed. Therefore, there are
at least 34-37 actual title plants.
Number 2065
REPRESENTATIVE KOTT returned to the 40-year requirement and
inquired as to why the standard 30 years with a deed of trust
wasn't used. He also inquired as to the average requirement in
other states with title plants.
MR. MERRELL said that he didn't know the average. However,
Washington and Oregon have similar title plant laws. In
Washington, the title plant [documentation] goes back to the
original documentation or patent. In Oregon, the requirement is
40 years. Mr. Merrell explained that it made sense to him to
follow the requirements of state's with similar laws.
Furthermore, there are things such as easements that are
theoretically forever as is ownership of the property. There
has been discussion of having everything go back to the patent,
which is what most everyone does because that's what the
underwriter requires.
Number 1992
REPRESENTATIVE ROKEBERG turned to the issue of transition and
asked if the July 1 effective date provides enough time.
MR. MERRELL related his understanding that most everyone's
records already go back to the patent. In further response to
Representative Rokeberg, Mr. Merrell said that the cost of
developing a title plant depends upon the location. In
Anchorage, creation of a title plant could be a relatively
expensive undertaking given the number of documents involved.
Whereas smaller areas might not take too long to put together.
He related that he has heard that it costs from $40-80,000 to
acquire copies of the documents.
Number 1886
REPRESENTATIVE CRAWFORD remarked that for every company to have
a title plant seems duplicative. It would seem more efficient
and cheaper to have a centralized title plant that each issuer
could use per a fee. Representative Crawford related his desire
to have more people entering this business in order to create
more competition. Would one centralized title plant for the
state be better, he asked.
MR. MERRELL agreed that it might be administratively cheaper if
everyone agreed to [use a centralized title plant]. However,
not everyone has agreed nor is there a requirement to operate a
joint title plant. Mr. Merrell pointed out that other states
such as Louisiana do this process differently, that is the
attorneys do the search and closings. In Alaska the title
companies do the searches and closings and are agents for
underwriters for [insurance] and thus an individual doesn't have
to only rely on an attorney.
Number 1746
PATRICK LAMB, President, Attorneys Title Guaranty Agency and
Attorneys Title Guaranty Services (ATGS), which is the title
plant company that's the subject of this legislation. Mr. Lamb
provided the following testimony:
For the past 25 years, I have been a title examiner
and manager with many of the title companies in
Southcentral Alaska. I have built title plants for
some of these companies ... in the Bethel, Kuskokwim,
Valdez, and Chitina recording districts. I am
familiar with the title records, title plant
maintenance procedures and title search procedures
used by those companies, including the ones that
belong to the Alaska Joint Plant in Anchorage, such as
First American.
As president of ATGS since last August, I've
conducted, or supervised other title examiners in
conducting, hundreds of title searches using only the
indices available through Motznik Computer Services,
and the records available through the public records,
such as the Anchorage Public Recorder's Office, BLM
[the Bureau of Land Management], State Division of
Lands, the Municipality, and the state and federal
courts. I am familiar with title searches using both
proprietary title plants and the title records, and I
am one of the few people now working in the state ...
who has used many of these proprietary title plants
that are available, as well as the public records.
I would like to explain the process of conducting a
title search, both using a title plant and using the
public records; pitfalls using both the public records
and title plants; and ... every title company's
practice of using the public records when it's in
their economic interest to do so.
First I would like to describe the process of
conducting a title search. Briefly, a title search
consists of accessing an index, often on line such as
the Public Recorder or Motznik, or a proprietary
index, to find citations to documents that may affect
title, such as deeds, easements, mortgages, or
judgments. Then you go to where the documents are
stored - either your own title plant or the Public
Recorder's Office - and make Xerox copies of them.
Then an experienced title person examines each
document to determine the effect, if any, on title.
Finally, the examiner prepares a title report or
commitment for title insurance.
A title plant is nothing more than a proprietary copy
of the documents, maps, and plats in the public
records, and a system of indexing the documents so
they can be retrieved so that you can make copies of
them.
As to Indices: Motznik Computer Services has an on-
line index of the public records, as does the Public
Recorder's Office. Most title companies, including
Attorneys Title, use Motznik as either their primary
or secondary index system. This widely used index is
not in dispute, and this bill does not affect use of
Motznik as a viable index.
As to Documents: Right now a title plant should have
copies of the documents from the public records going
back 25 years. The bill would force all title
companies to make a copy of every document of public
record going back 40 years. There are over 10 million
pages of documents for the Anchorage Recording
District alone. The only reason to have your own copy
of these records is convenience of access for
Xeroxing. There's no difference between using the
public records and using your own title plant to make
the Xerox copies.
Number 1582
A title plant is a derivative of the public record.
The public records are the only official, legally
binding documents. If there is a problem with the
public records, it will either be caught when the
title plan is posted or when the title search is
performed. If there's a difference between the public
records and the title plant records, the public
records prevail.
A 10 million document title plant is so expensive to
create and maintain that Section 200 of the statute
has served as a complete barrier to entry in the
Anchorage title insurance market for 20 years. The
only company that sells copies of the public records -
Western Microfilm - is owned by the same people that
own First American. They ask newcomers for eight
times their normal price ($80 vs. $10.50 for a roll of
microfilm), and if you ask to purchase the film, they
tell you they don't have time to make the copies. Or,
if you ask to purchase one of their extra title plants
that are around, they want to know who will use them
before considering their sale of lease.
Both a proprietary title plant and the public records
can have errors. The Public Recorder has outlined
some of the problems inherent in using the public
records for title searches. For instance, she
mentions the inability of the system, prior to 1999,
to accommodate and index documents with more than 999
entries. However, the only such document is the
Anchorage Tax Delinquency Notice that's put out about
every two years. This is remedied by the tax
reporting services that all title companies use.
Other issues with the Public Recorder's tract or
geographic index are remedied by the grantor-grantee
index. All experienced title examiners, not just me,
are familiar with these shortcomings and know how to
work [with] them. The letter from the Recorder,
Sharon Young, specifically states at the top of it,
that the recorder's office has no authority to
indicate whether or not their records can be used for
title insurance purposes. That's because they've
never done a search ... for title insurance purposes.
She also says that until 1996, the location index was
a courtesy index only and that many indexing
variations have occurred over the years.
On the other hand, the proprietary title plants are
just as inadequate for conducting complete title
searches. Exhibit 1 ... is a partial litany of title
plant kirks and problems that I'm personally familiar
with. All title plants have some errors or holes, and
most are missing large groups of information, such as
PLO roads, section line easements, and RS2477 rights-
of-ways. I've personally corrected hundreds of
mispostings in the Anchorage and Valley title plants
owned by First American and other companies that I've
worked in since 1976. Most Alaska title companies
rely on the public records for at least some of their
information. In other words, having a title plant is
no guarantee that your title searches will be right
every time.
Number 1437
A title search is both a science and an art, and
different title examiners may view the same documents
differently, and prepare slightly different title
reports. Even the most experienced title examiner can
make mistakes. Our underwriter, Old Republic National
Title Insurance Company, has examined our title search
procedures using the public records, and found that we
meet their standards. If our examiners make a
mistake, Old Republic has to pay the claim. Again, a
mistake in the title examination does not adversely
affect the public, it affects only the underwriter.
All of the title insurance representatives listening
in and here in this room can tell you stories of
mistakes, using their title plants, that resulted in
payment of claims.
While no system is perfect, all of the title records
I've used, including the public records, are good
enough for an experienced title examiner to prepare
competent title searches. After 20 years of using
proprietary title plant records, and five years of
using the public records, it's my professional opinion
that the title examiners using public records, such as
those at ATGS, conduct title searches that are at
least as good as those of our competitors who use the
private title plants, and better than some.
Next, I would like to tell you that all title
companies conduct title searches from the public
records when it is in their financial interest to do
so. No title company owns a title plant for all the
recording districts in the state. So when a title
company gets a [routine] transaction out of their
area, usually they'll refer that to another company
that works in that area. But when the transaction is
a big one that they want to keep the entire fee for
themselves, they usually would send an examiner.
Often fly them to that district recorder's office and
conduct their own title search in the public records
so they can keep the transaction and retain the entire
fee. For instance, when working for other companies,
I personally have flown to Fairbanks on many occasions
... to conduct title searches using public records for
areas such as Prudhoe Bay ... and ... big box stores;
and I've flown to Kenai to search a $20 million
[private] prison site from the public records; I've
flown to Homer to use the public records for multiple
refis [refinances]. And these have been for various
title agencies, and all these using the public records
and Motznik index.
It's important to note that these title companies use
the public records for the big transactions, the ones
with the most complicated title issues and the highest
liability and risk. Their underwriters know of this
procedure or they should know, and as far as I know,
there is no [higher] incidence of claims when the
title companies have used the public records. So,
it's hypocritical to say the public records are not
good cause they all do it -- at least the companies
I've worked for.
So, as one of the few title examiners who has used
both title plants and the public records on an
extensive basis, I want to assure each of the members
of this committee that there is no crucial difference
between using a private title plant and using the
public records. Therefore, in my opinion, this bill
does nothing to protect the public from bad or
erroneous title policies. Its only effect is to act
as a barrier to entry in the field and eliminate
competition, price competition also.
Number 1237
MR. LAMB concluded by informing the committee that virtually all
the title searches for the oil companies, such as for the Trans-
Alaska Pipeline, used the public records. Furthermore, the oil
companies use the public records to perform some of the most
difficult searches, such as mineral searches. Mr. Lamb informed
the committee of five examples of title plant issues. He
explained the first example in which First American Title Plant
used the state recorder's tract book location index, public
records, exclusively for subdivided land from 1915-1968. He
noted that during the years he worked with [First American Title
Plant], it didn't use the backup Grantor Grantee Index. In the
second example, the Trans America Anchorage Plant (ph) that is
owned by Trans Alaska First American (ph) was known for its many
indexing variations, not the least of which was the Assignment
and Reconveyance Index that was its only search method for
certain documents recorded in the 1980s. With regard to the
third example, First American's Palmer and Talkeetna title
plants are so poor in the section land searches that in his
recent 14 months as their manager, Mr. Lamb backed up their work
on section land searches by using the public record or Motznik
Indices. For the fourth example, Mr. Lamb informed the
committee that McKinley's title plant [McKinley Title & Trust
Inc.] is a paper or insertion system in which documents are
stuffed into file folders where they can and do fall between the
cracks. In the last example, Mr. Lamb informed the committee
that he was the land manager for Land Title [Company of Alaska
Inc.] in most of the early 1990s. This company does most of its
business in the rural areas. This company relies on Motznik and
the public record in areas outside of Anchorage and Valdez.
Number 1112
CHAIR MURKOWSKI surmised then that so long as there is an
experienced title examiner who knows where to go and look, that
examiner can provide the same consumer protection as an entity
with a full and complete title plant.
MR. LAMB replied yes. Furthermore, the Division of Insurance
has reviewed the procedures of [Attorneys Title Guaranty Agency
and Attorneys Title Guaranty Services] and determined that it's
no threat to the public.
CHAIR MURKOWSKI posed a situation in which the title company
makes a mistake with the title report during a title search.
She related her understanding that the financial backer would
"eat the mistakes."
MR. LAMB agreed. Mr. Lamb informed the committee that Old
Republic [the financial backer for Attorneys Title Guaranty
Agency and Attorneys Title Guaranty Services] has received
Standards and Poor's highest rating awarded to a title insurance
company for the eighth consecutive year. Since the financial
backer would pay the claim, there is no risk to the public.
Number 1018
REPRESENTATIVE CRAWFORD surmised from Mr. Lamb's testimony that
one could do business anywhere in the state, only with a partial
title plant for the area.
MR. LAMB agreed, adding that most title companies do so. Mr.
Lamb explained that most title companies will have a title plant
in an area, but virtually never refuse a search. Usually, it's
not financially feasible to go to the area and perform the
search and thus the search is usually farmed out to a company in
the area. However, when it's a large search, the company does
go to the area because it doesn't want to share the premium.
REPRESENTATIVE ROKEBERG inquired as to whether Mr. Lamb has a
joint title plant.
MR. LAMB clarified that he has a certificate of authority to
operate a joint title plant. In further response to
Representative Rokeberg, Mr. Lamb specified that Old Republic
National, Attorneys Title Guaranty Agency, and [Attorneys Title
Guaranty Services] form the joint title plant.
REPRESENTATIVE ROKEBERG inquired as to the location of the title
plant.
MR. LAMB explained that [the joint title plant with which he is
involved] received its certificate of authority from the
Division of Insurance in order to use the public records, which
the statute allows. He further explained that this joint
venture uses about 30 years of title searches of an abstract
that is on-line in the office. The recording office is then
used to finish the search and go back to patent and obtain
copies. He confirmed that Attorneys Title Guaranty Agency [the
joint title plant] is, per statute, a title insurance limited
producer while Attorneys Title Guaranty Services is the title
plant company. This joint title plant is the only plant that
has ever been issued a certificate. He related his
understanding that the joint title plant in Anchorage has never
applied for or received a certificate to operate.
Number 0880
REPRESENTATIVE ROKEBERG related his assumption then that the
company's file cabinet is its title plant.
MR. LAMB answered that [the joint title plant] has some plats
and is building subdivision folders as time passes and records
are being purchased as they are available. He noted that the
company is being blocked from buying most records. He explained
that Western Microfilm, the one company that has copies of the
records, is owned by First American. [Western Microfilm] wanted
$80 a roll for its microfilm, which [the joint title plant]
viewed as unreasonable. Western Microfilm agreed to sell the
microfilm for $10.50 a roll and [the joint title plant] agreed
to purchase it, but Western Microfilm then said it didn't have
time to make the copies.
REPRESENTATIVE ROKEBERG asked if he understood Mr. Lamb to mean
that he couldn't go into the recorder's office and make copies.
MR. LAMB answered that he could go into the recorder's office
and make copies. However, the private company, Western
Microfilm, that has the microfilm won't sell it to [the joint
title plant].
Number 0794
SARAH McNAIR-GROVE, Actuary P/C, Division of Insurance,
Department of Community & Economic Development (DCED), related
that HB 424 has been presented as clarifying some of the issues
resulted in the litigation. To the extent this legislation does
so, the division thinks the legislation is appropriate.
However, the division believes HB 424 goes beyond fixing some of
the issues, specifically the 40-year requirement and the
deletion of the public records requirement.
CHAIR MURKOWSKI requested that Ms. McNair-Grove elaborate with
regard to the 40-year requirement. She asked if the division is
of the opinion that it's not necessary to go back that far or
should it not be required to be in the title plant [because] one
should be allowed to rely on the public record for that
information.
MS. McNAIR-GROVE reiterated that the purpose of HB 424 is to
clarify the issues causing confusion, and the [40-year
requirement] is an additional issue beyond that.
REPRESENTATIVE ROKEBERG requested that Ms. McNair-Grove expand
on the issue of deleting the public records.
MS. McNAIR-GROVE said that deletion of the public records also
appears to go beyond what is necessary to offer clarity.
REPRESENTATIVE ROKEBERG related his belief that [the public
record] has caused some of the confusion with the interpretation
of the statutes.
MS. McNAIR-GROVE specified her belief that some of the confusion
is related to whether [AS 21.66].210 speaks to the requirements
of a title plant or whether it's merely a process for putting
together an entity.
Number 0634
REPRESENTATIVE MEYER inquired as to who is involved with the
litigation.
MS. McNAIR-GROVE deferred to the director of the division.
CHAIR MURKOWSKI asked if Ms. McNair-Grove was involved with the
certification of ATG.
MS. McNAIR-GROVE responded not directly, although she noted her
involvement with some of the preliminary discussions.
Number 0564
BOB LOHR, Director, Division of Insurance, Department of
Community & Economic Development, testified via teleconference.
With regard to the litigation, Mr. Lohr informed the committee
that the administrative litigation continues. Mr. Lohr
explained that when the complaint is resolved by a hearing
officer under contract for the division, he [the director] will
be the ultimate decision-maker. Therefore, Mr. Lohr specified
that he couldn't say anything that would pre-judge those matters
before the hearing officer. The issues before the hearing
officer are close to the heart of HB 424.
REPRESENTATIVE MEYER inquired as to who brought forward the
complaint.
MR. LOHR answered that the Attorneys Title Guaranty Agency and
Attorneys Title Guaranty Services filed the complaint based on
the division's cease and desist order preventing use of the
certificate that the division had previously granted under AS
21.66.210. In mid-August 2001 the division issued a certificate
of authority under AS 21.66.210. Then, based on Assistant
Attorney General Andersen's legal opinion the division issued a
cease and desist order, which is the subject of the appeal by
Attorneys Title Guaranty Agency and Attorneys Title Guaranty
Services. Mr. Lohr noted that the hearing officer has granted a
request to intervene to others, including the Land Title
Association as an amicus curiae. Furthermore, the Attorneys
Title Guaranty Association has been guaranteed leave to
intervene as a party. There is a pending motion from Land Title
for intervention in the case. Mr. Lohr informed the committee
that the central issues, as specified by the hearing officer,
are AS 21.66.200 and AS 21.66.210. However, no conclusions have
been reached in those matters. Mr. Lohr also informed the
committee that this matter has a hearing scheduled for late May
of this year. Moreover, he expected to receive a recommended
decision by the end of June.
REPRESENTATIVE MEYER questioned whether this matter should be
taken up while there is related litigation.
REPRESENTATIVE ROKEBERG clarified that this isn't in the courts
but rather is a hearing through the APA (Administrative
Procedure Act).
CHAIR MURKOWSKI requested that Mr. Lohr speak to the certificate
issued by the division under AS 21.66.210.
MR. LOHR answered that he believes that to be at the heart of
the case and thus he said he couldn't answer. However, he
directed attention to Assistant Attorney General Andersen's
opinion.
Number 0177
CHAIR MURKOWSKI inquired as to the procedure the division would
go through in examining a title company in order to ensure it
operates in the best interest of the public. She asked if the
division has examiners review their documentation or process.
MR. LOHR confirmed that the division does send examiners to
review the documentation or process of a title company. He
explained that the division receives an application, which is
reviewed according to the statutory standard with regard to what
the application must contain. If the application is incomplete
or questions are raised to the reviewing staff, the applicant
would be contacted for additional information. Based on that
information a physical field visit to the offices of the
applicant would be conducted and an evaluation would be done
based on that.
REPRESENTATIVE HAYES echoed Representative Meyer's contemplation
with regard to whether this legislation is too soon [in light of
the litigation].
MR. LOHR said that is a legislative policy call.
TAPE 02-51, SIDE A
REPRESENTATIVE ROKEBERG commented that the legislature has the
prerogative [to bring forth legislation], particularly when
there are claims of ambiguity or requests by courts for
corrections or if there is the need for curative legislation.
However, he acknowledged that there is the question as to
whether it's a good tactic to offer legislation during
litigation or whether there are separation of powers issues.
Representative Rokeberg noted that he has passed a handful of
bills that have specifically overturned supreme court cases and
other case law, which he viewed as part of a legislator's job.
Representative Rokeberg said that he didn't believe it was
inappropriate to attempt to fix a situation and perhaps make
further expenses with regard to the hearing moot.
REPRESENTATIVE MEYER inquired as to whether this would be
retroactive. He pointed out that this company went into
business based on a certain statute, which is being changed in
this legislation. Could this case cost the state more because
the company could have litigation against the state, he asked.
REPRESENTATIVE ROKEBERG opined that the hearing will find that
it's interpretative of the statute and the cease and desist
order will remain in place. Representative Rokeberg remarked
that [were the legislation to pass], the hearing officer could
take notice of legislative intent.
Number 0282
BARB NORD, Chair, Issues Committee, Kenai Peninsula Association
of Realtors, testified via teleconference. Ms. Nord announced
the association's wholehearted support of HB 424 because it is
viewed as public protection legislation. She related that the
current 25-year requirement isn't viewed as a significant amount
of time, considering that most mortgages last for 30 years and
up to 33 years in the Kenai Peninsula area and other rural
areas. She concluded by urging the committee's support of HB
424.
Number 0330
MICHAEL PRICE, Owner, Mat-Su Title Agency, testified via
teleconference. As a real estate attorney and title agency
insurance company owner, Mr. Price emphasized his support for HB
424 and encouraged its passage. Mr. Price remarked that the
controversy itself has seemed to over take the substance of what
what is being reviewed. In Mr. Price's opinion, the legislature
appropriately made Alaska a title plant law state. He said he
didn't believe anyone could refute that a title plant state
results in the best service to the individual consumer with the
lowest amount of claims. Mr. Price related his belief that the
title plant statutes speak to quality and service.
MR. PRICE directed attention to AS 21.66.170 of which the very
first sentence says, "(a) A policy or contract of title
insurance may not be written until the title insurance company
conducts or has conducted a reasonable search and examination of
the title and has made a determination of insurability of title
in accordance with its established underwriting practices."
Furthermore, compiling records for the past 25 years would only
take one back to 1977, which he didn't believe to be
appropriate. He discussed the need to compile records for a
lengthier time period due to the various easements, covenants,
et cetera. Mr. Price stressed that HB 424 standing alone,
regardless of the recommendation of the hearing officer, makes
sense. In conclusion, Mr. Price encouraged the committee to
support HB 424.
CHAIR MURKOWSKI returned to AS 21.66.170 and said she didn't see
the definition of "reasonable search and examination". However,
AS 21.66.200 provides that "A title company shall own and
maintain in the recording district" [a title plant consisting of
records] for a period of 25 years, although it doesn't require
searching records back to [25] years. Furthermore, it doesn't
seem to indicate the need to reference those [records]. She
asked if the statutes provide for what a "reasonable search and
examination" of title is.
MR. PRICE said that there is no other provision in statute.
Although the title industry has been woefully short of
regulations, there have been a number of orders from the
director of the Division of Insurance. By implication, the
statutes were tied together such that a reasonable search had to
be a search of at least 25 years. When these statutes were
originally passed that 25 years went prior to statehood. In the
context of a title plants, [records] go back to the patent,
which he characterized as a reasonable search. Mr. Price
related his understanding that current statutory language could
be interpreted to mean that a reasonable search only goes back
to 1977.
Number 0920
CHRIS RODRIGUEZ, Alaska Land Title Association, testified via
teleconference. He informed the committee that the 13 board
members of the Alaska Land Title Association unanimously voted
to support HB 424. Mr. Rodriguez turned to his experience as a
former manager of the Kenai, Wasilla, and Homer offices for
First American Title. With regard to the testimony that title
companies do searches in areas in which they don't own a plant,
he said as a manager he has never dealt with that situation.
Mr. Rodriguez informed the committee of his personal support of
HB 424 because without clarification now, the statute could
become misinterpreted by others entering the title industry.
Number 1094
TERRY BRYANT, President, First American Title of Alaska,
testified via teleconference. Mr. Bryant informed the committee
that he is responsible for ten of its offices around the state.
First American Title of Alaska owns and operates 20-plus title
plants that go back 40-plus years. Mr. Bryant echoed earlier
testimony that Alaska is clearly a title plant state. This
legislation merely clarifies who owns the title plant and the
requirement for a title plant to maintain records. Mr. Bryant
pointed out that establishment of indexes, the purchase of maps,
and infrastructure such as computers and microfilm is the cost
of entering the industry. The years worth of documents is a
very minute portion of entering the industry.
MR. BRYANT noted that he built the last title plant established
in the state. Although the statutory requirement was for 25
years worth of data, he went back 40 years. This title plant
has been in operation for two-and-a-half years and has become
self-supporting. As a member of the board of the Alaska Land
Title Association, Mr. Bryant relayed that discussions regarding
the 40-year plant requirement or back to statehood requirement
occurred in the board meetings months before the litigation was
known about. Furthermore, Mr. Bryant related his belief that
every licensed title company, save the title company under a
cease and desist order, currently maintains 40 years of records.
Therefore, there would be no start-up expense because it would
merely be a statutory requirement.
MR. BRYANT turned to an earlier comment that the underwriter
would pay for a mistake. However, he refuted that. He informed
the committee that a homeowner in Fairbanks couldn't sell her
house for four years due to a title mistake. After filing for
bankruptcy, the underwriter defends the homeowner who ends up
destitute. Regardless of who pays the bill if an individual
can't sell their home until litigation is complete, the
individual is at a disservice. The exposure consumers receive
is inappropriate. Mr. Bryant related his understanding that
Oregon has increased its title plant requirement to 50-plus
years.
MR. BRYANT recalled comments indicating that one can't do
business because Western Microfilm is owned by First American
Title. He highlighted that he is the president of First
American Title of Alaska, Summit Title of Alaska, TransAlaska
Title Inc., and Title Group. Therefore, he has total authority
for First American Title of Alaska, which has absolutely no
relationship with or ownership in Western Microfilm. However,
he noted that one of the minority owners of [First American
Title of Alaska's] LLC is personally involved.
MR. BRYANT turned to the term "reasonable search" and said that
he would defer to the industry [for its definition]. He
emphasized that the Alaska Association of Realtors, the Alaska
Homebuilder's Association, the Alaska Land Title Association,
and the Alaska Mortgage Banker's Association have unanimously
voted to support HB 424.
Number 1447
REPRESENTATIVE MEYER asked if the support from the
aforementioned groups was given verbally or is there written
documentation.
MR. BRYANT answered that he has seen documentation [to that
effect], although he noted that he doesn't represent those
organizations. He pointed out that the Alaska Homebuilder's
Association noted its support in their March 2002 newsletter.
The committee should have copies of letters of support from the
Alaska Land Title Association and the Alaska Association of
Realtors. He clarified that he wasn't sure of the status of the
Alaska Mortgage Banker's Association's formal support.
Number 1540
KIRK WICKERSHAM provided the following testimony:
I'm an Anchorage attorney and real estate broker, and
I'm a former vice chair of the Alaska Real Estate
Commission. I own the For Sale By Owner Assistance
Program, a company that helps people sell their
property on their own.
I also own Attorneys Title Guaranty Agency, which is a
title agency, and I represent Attorneys Title Guaranty
Services, which is its title plant company. ATGA and
ATGS are the companies and the only companies that
would be put out of business by this bill.
This afternoon I'd like to discuss the current title
statutes and the provisions of the bill, protection of
the public, competition in the industry, fairness, and
the public policy implications of the bill.
I'd like to begin with the current law. There are
three interrelated statutes. The first is ... AS
21.66.170, which requires title companies to conduct a
title search before issuing a title insurance policy.
I think that there is a provision in that statute that
says that the standards for that title search are to
be established by the underwriter. And that's why
there are no uniform standards in the state. ... And
that would make sense because the underwriter is whose
paying the bill if something goes wrong. Then there
are two sections relating to how that title search can
take place. AS 21.66.200 requires title companies to
have a title plant, which is a set of proprietary
copies of the public records that go back 25 years.
That is the statute that all title companies and their
agents have relied on for the past 26 years. A title
plant is so expensive to create and maintain that it
has served as a barrier to entry in the Anchorage
title insurance market for over 20 years. However, AS
21.66.210, which was passed at the same time as
Section 200, ... allows title companies and agents to
join together to form a joint title plant, and then
allows the joint title plant to use the public records
for title searches. This is an alternative that no
one used until last summer, when the state certified
ATGS as the first title plant to use the public
records. The rest of the title industry, and
especially the biggest statewide company, First
American, exploded with a lawsuit, a license action,
and this bill.
Number 1669
House Bill 424 would do two main things: the first is
to abolish the right to use the public records for
title searches, leaving us with no choice but to build
and maintain a title plant. Because this is
economically infeasible, which is a fact that is well
known to the members of the title insurance industry,
the only purpose of that provision is to put ATGS out
of business. The second provision would raise the
requirement for proprietary title records from 25
years to 40 years. Since 25 years has already proven
to be an effective barrier to entry into the industry,
the purpose of that provision could only be to
absolutely ensure that there will be no further
competition in the title insurance industry in Alaska,
or at least in Anchorage and the big markets. And
actually, 40 years is as irrelevant as 25 years,
because in most instances, a good title report will go
back to the U.S. Patent. And I would like to also
comment that statehood is irrelevant. The U.S. Patent
is where the title record begins. And I would also
like to explain that maintaining 40 years' worth of
records is not the same as requiring a 40-year search
or limiting the search to 40 years. You've got to go
back as far as you've got to go back to do a competent
title search ....
Some people have suggested that virtually all states
require title companies to maintain a complete set of
proprietary records in their title plant. ...
[Exhibit 2] shows the actual situation - only six
states have a statutory requirement similar to HB 424.
Five others require an index but not a copy of the
records and 39 states plus the District of Columbia
and Puerto Rico have no statutory requirement. I did
this analysis in February of 2002, and the most recent
action that I found among the 50 states was that
Montana ... dropped their requirement last year. ...
Also, there is no title plant requirement in any of
the various model acts promulgated by the American
Land Title Association or the National Association of
Insurance Commissioners.
Number 1782
I'd like to turn to the purpose of this bill. AS
21.66.170 specifically provides that a title search
must be done to a standard established by the
underwriter. And it's the underwriter that takes the
financial risk of a mistake. In the case of ATGS, Old
Republic National Title Insurance Company, one of the
nation's largest and highest rated title companies,
underwrites our policies. The public is not at risk
from a bad title search from us, or from any other
title companies in the state. Moreover, the Division
of Insurance spent three days examining our process of
conducting title searches, specifically our use of
Motznik and the public records, and gave us the green
light. And I would like to quote from a document
signed by Director Lohr on December 10th:
"On October 3rd and 4th 2001, Ted Laurbach(ph),
Chief of Market Conduct for the division
conducted an on-site inspection of ATGS. This
inspection reviewed the contents of the plant and
the manner in which ATGS performed title
searches. ATGS owns some subdivision records,
but primarily relies on searches of public
records and Motznik when completing a title
search. The inspection observed that based on
the experience of Mr. Lamb, neither he nor ATGS
is a threat to the consumer."
And I'd also like to point out that a joint title
plant, licensed under Section 210 has requirements for
experience in financial responsibility that are not
found for proprietary title plants under Section 200.
So if you're using the public records, you have to
have an experienced title examiner like Mr. Lamb and
the other people on our staff. And that's not a
requirement of a title agency or a title company that
maintains its own proprietary plant.
Number 1859
The fact is that we are conducting competent title
searches using the public records, and there is no
valid public purpose to requiring us to make a copy of
the 10,800,000 pages of documents in the Anchorage
recorder's office. If this bill becomes law, it would
be subject to serious constitutional challenge because
it denies substantive due process as guaranteed by the
state and federal constitutions. That would not only
be ATGS but all the future companies that emulated in
the future.
Now, as to the issue of competition in the industry.
Practically speaking, title insurance is a necessity
in real estate transactions. But there has never been
price competition in the Alaska title industry. Over
the years, the large title companies have gobbled the
small agencies up ... [as illustrated by Exhibit 3].
Counting us there are only five title agencies in
Anchorage compared to about 30 mortgage companies.
Competition has been artificially constrained by the
perception that any new title agency had to have a
title plant - a practical impossibility that will be
cemented into law if this bill passes.
Number 1934
... Think of the impact on the legal profession, and
on attorney's fees, if you were to require all lawyers
to make their own copy of the courthouse law library.
Or, if you required all auto insurance agencies to
maintain their own copy of the DMV records. Before we
even opened for business, we asked the Division of
Insurance for a rate decrease, which the first in
recent memory. While they initially turned us down
because of a lack of operating history, if we are
allowed to survive we will bring increased consumer
choice and price competition to the Alaska market for
the first time.
I'd like to address the issue of fairness to the
existing title companies ... the so-called "level
playing field." The proponents of this bill suggest
that ATGS is competing unfairly because it does not
bear the burden of maintaining a title plant. We are
not competing unfairly. The [statute] we operate
under has remained unchanged for over 28 years, and
the other title companies could have used it and the
public records at any time. And they still can.
Industry representatives claim that ATGS' operations
have reduced the value of their title plants. This,
too, is not true. The decrease in value is due, not
to competition, but to technological innovations in
the public recorder's office that make their title
plants obsolete. For instance, the public recorder
has begun digitizing all public records on a go-
forward basis. In this wallet, two CDs produced by
the Municipality of Anchorage hold all the tract maps
of Anchorage. ... These are produced by the Public
Recorder's Office at taxpayer expense. These CDs
contain the public records from Southcentral Alaska
since July 1, about 200,000 pages, ... all produced by
public agencies and available for just a few hundred
dollars. All are easily accessed on a home computer.
Eventually the public recorder will do this for all
records.
Number 2024
The public recorder recently put out a request for
proposals to assist in digitizing the past five years
of Southcentral records. ATGS was the only title
company that initially responded. Why? We believe
that it's not in the other title company's interest to
have the public records widely available in a
convenient and inexpensive format. These companies
are locked into an obsolete and redundant system.
They want you to pass a bill to put somebody who is
more efficient and technologically adept out of
business. Oddly, this bill would not outlaw the use
of the public records for title searches, including
the out-of-town title searches described by Pat Lamb.
The bill would require a title company to own a set of
records, but it does not require the title company to
use those records to prepare a title search. Thus,
this requirement would be a barrier to entry, not a
real public policy measure.
These companies claim that they have been damaged
because the state has removed the so-called
"requirement" to maintain a title plant. There is no
such requirement, but what if there was? In other
words, what if the bill is defeated, and these other
companies would have to compete with us? Well, if it
is true that they can do a better title search with
their own title plant, then they could continue to use
their title plants and charge higher rates for a
supposedly better product, and the plant would still
have value to them. However, if the bill fails, they
will apparently write off their title plants as
worthless. In other words, they would start using the
pubic records like we do. And that's an admission
that the public records would work for title searches,
and so their title plants have already lost their
value. In truth, their only value is to preclude
competition under Section 200. This illustrates that
this bill has no public purpose, only a private
purpose.
Number 2095
Now I'd like to deal with the next 28 years rather
than the last 28 years. And this is a stark public
policy issue for you. Are you for free enterprise or
are you for protectionism? You have the future of
this industry in your hands. On the one hand, you
adopt the approach of this industry bill, which is to
require title agencies to maintain a not very useful
copy of millions of pages of public records. And,
since the current 25-year requirement has been
sufficient to preclude any new title plant in the
Anchorage market for 20 years, raising the requirement
to 40 years will ensure that the existing agencies
will never face competition. You will be protecting
the existing agencies from new competitors and price
competition. That provision may also impact the ...
operations of one of the Anchorage agencies as well as
the other agencies in the smaller communities of this
state. And sometimes there's only one agency in those
smaller communities.
First American's actions are especially important in
this regard. In recent years, First American has
engaged in an aggressive program of buying or
assimilating independent title agencies in Anchorage
and throughout the state. [Exhibit 3] shows that
consolidation of the title industry in ... Anchorage
in recent years. First American already has 48
percent of the market share in Anchorage and about the
same shares statewide. It's actions indicate an
intention to make Alaska a one-company market.
Already title insurance is so expensive that lenders
are going bare. Wells Fargo has their own contract
employee sitting at the recorder's office five days a
week, doing title searches. Key Bank has dropped
title search requirements for home equity loans under
$500,000. American Title Insurance out of Nebraska,
which is a First American subsidiary, sells unlicensed
title evidence from Alaska obtained under the guise of
property profiles. First American recently took over
all the office in the Alaska Land Title Association
... , and just short of a majority of board positions.
It has filed suit, which is now dismissed. It has
lobbied the Division of Insurance and proposed this
bill just to get ATGS out of business.
Number 2179
If you pass this bill, you will have less competition
and no price competition at all in this industry. On
the other hand, you could embrace free enterprise. In
industry after industry, monopoly practices have been
bad for Alaskans. Competition has brought consumer
choice and lower prices. I urge you to envision a
future where there are many title agencies, all
competing for the consumer's dollar. You should
embrace the cutting edge digital technology being
implemented at taxpayer expense by the Public
Recorder. And again, there is no risk to the public
.... That has been specifically determined in our
case by the Division of Insurance. Claims by
homeowners are covered by the underwriter.
But there is even a better way than this bill. The
Division of Insurance examined ATGS' use of public
records and issued us a certificate of authority. Our
company is legal and fully operational using the
public records. Old Republic, our underwriter, is a
member of ATGS, and Section 210 clearly states that it
has the legal right to use ATGS' title searches to
issue title insurance policies. Nevertheless, under
... pressure from the other title companies, the
division has filed a license action ... against Old
Republic for not having its own redundant title plant
under Section 200. Since you can do competent title
searches under either Section 200 or Section 210,
common sense holds that you'd only have to comply with
one of the statutes and not both. Put another way, if
you're legal under 210, what's the point of requiring
you to make a copy of over 10,000,000 documents? We
believe this makes no sense, and the division simply
gave in to pressure from the other title companies.
Number 2243
While we are confident that Old Republic will
ultimately prevail, it could take years and hundreds
of thousands of dollars to make our way through the
court system. We have comparatively meager resources
to fight First American and the rest of the industry.
Our customers as well as theirs will be paying as much
for litigation as for title insurance. We have
prepared a committee substitute and provided to the
Chair that would make it clear to the Division of
Insurance that title companies have the choice of
complying with either the title plant statute, Section
200, or the joint title plant statute, Section 210.
Either is adequate for title searches. Requiring both
is redundant and imposes an impossible barrier to
entry in the field. We urge you to substitute our
proposal for the existing language in House Bill 424.
MR. WICKERSHAM, in response to Representative Rokeberg,
confirmed that he is a practicing licensed attorney who is the
principle owner of For Sale By Owner Real Estate.
REPRESENTATIVE ROKEBERG asked if Mr. Wickersham is suing the
State of Alaska on the grounds that his firm can give "kick
backs" to homebuyers.
MR. WICKERSHAM replied no. Mr. Wickersham clarified that he has
a company called Discount Buyers Realty that has filed suit
against the State of Alaska in order to allow that company to
provide price competition for buyers. This price competition
would be provided in the same way that it's provided for sellers
for real estate, which is the same way in which ATGS and ATGA
hope to provide price competition for consumers of title
insurance.
REPRESENTATIVE ROKEBERG surmised then that Mr. Wickersham is
applying the methods he uses in the real estate business to the
title insurance business.
MR. WICKERSHAM emphasized his belief in price competition and
consumer choice.
TAPE 02-51, SIDE B
REPRESENTATIVE ROKEBERG asked if Mr. Wickersham has offered to
bundle real estate sales with title insurance sales.
MR. WICKERSHAM replied no. In further response to
Representative Rokeberg, Mr. Wickersham said that he hasn't
offered any discounts for title insurance premiums. Mr.
Wickersham informed the committee that when ATGA was in the
final process of getting licensed, the Real Estate Procedures
Settlement Act (RESPA) requires disclosure if the owner of a
real estate firm also has a title firm and specifically requires
offering the choice of not bundling the services. At the time
[For Sale By Owner Assistance Program] was trying to get
licensed, it also applied for a rate reduction in title
insurance. Therefore, the contract for [For Sale By Owner
Assistance Program] specified that using ATGA may result in a
reduction in the consumer's title insurance fees. This notice
was provided to anyone using ATGA. However, the state turned
down the rate reduction request and that provision was
eliminated from the contract.
REPRESENTATIVE ROKEBERG related his understanding that Mr.
Wickersham used [rate reduction] notice in a contract before
there was approval from the division to lower insurance rates.
MR. WICKERSHAM agreed, but emphasized that the notice used the
word "may." Furthermore, when the division denied the rate
reduction, the entire sentence was eliminated from the contract.
Number 2241
REPRESENTATIVE MEYER asked if his understanding that the realtor
or buyer chooses the title company was correct.
MR. WICKERSHAM answered that under RESPA the buyer has the
choice.
CHAIR MURKOWSKI recalled testimony regarding situations in which
a title company has a transaction in an area where that title
company didn't have a title plant. If HB 424 passed, would the
title companies be unable to use the public records in the areas
in which the title companies don't have title plants, she asked.
MR. WICKERSHAM pointed out that such would be governed by [AS
21.66].170. In the State of Alaska there is no minimum standard
for the title search. Therefore, under present law and under HB
424 title companies could use the public records. This
legislation would only require that a title company own a copy
of the records in the community where the company has an office.
Nothing requires the title company to use its title plant
records.
Number 2124
MR. LOHR offered the following correction to his earlier
testimony. He clarified that Mr. Wickersham is correct that the
cease and desist order issued by the division was issued to Old
Republic National Title Insurance Company in San Francisco,
California.
CHAIR MURKOWSKI announced that she didn't believe HB 424 would
be moved from committee today.
REPRESENTATIVE ROKEBERG offered to bring some clarity to HB 424.
He explained that Section 1 of the bill clarifies that Alaska is
a title plant state. He pointed out that page 2, line 2,
specifies "for the purpose of engaging in the business of
preparing abstracts of title searches [FROM PUBLIC RECORDS OR]
from records to be owned by the entity ... upon the basis of
which a title insurance limited producer or a title insurance
company will issue title policies." Page 2, line 8, specifies:
"The application must contain". Representative Rokeberg
explained that [AS 21.66].200 is about the title plant and [AS
21.66].210 speaks to how to apply to obtain a certificate to
operate. Representative Rokeberg clarified that Mr. Lamb and
Mr. Wickersham are inferring that the recorder's office is a
title plant. However, [AS 21.66].210 is the application process
under which [Mr. Lamb and Mr. Wickersham] applied and the
division issued a certificate.
Number 1970
CHAIR MURKOWSKI related her understanding that [AS 21.66].210 is
a joint plant as opposed to a title plant.
REPRESENTATIVE ROKEBERG agreed, but reiterated that it speaks to
the application.
CHAIR MURKOWSKI related that she read [AS 21.66.200] to address
a title plant and [AS 21.66.210] addresses those applying to be
a joint plant.
REPRESENTATIVE ROKEBERG emphasized that [AS 21.66.210] is
referring to the application. The AS 21.66.170 and AS 21.66.200
are the operative statutes. He directed attention to page 2,
lines 3-4, "to be owned by".
CHAIR MURKOWSKI highlighted the "or" [language in the current
statute].
REPRESENTATIVE ROKEBERG indicated that he had no problem with
using the public records. Due to the huge investment in a title
plant, one doesn't invest in a title plant until approval is
gained from the Division of Insurance. He continued to
emphasize that [AS 21.66.210] speaks to an application.
[HB 424 was held.]
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
6:00 p.m.
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