2022 -- H 7761

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LC005168

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2022

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A N   A C T

RELATING TO INSURANCE -- RHODE ISLAND TITLE INSURERS ACT

     

     Introduced By: Representative Joseph J. Solomon

     Date Introduced: March 02, 2022

     Referred To: House Judiciary

     It is enacted by the General Assembly as follows:

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     SECTION 1. Sections 27-2.6-3 and 27-2.6-16 of the General Laws in Chapter 27-2.6

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entitled "Rhode Island Title Insurers Act" are hereby amended to read as follows:

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     27-2.6-3. Definitions.

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     As used in this chapter:

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     (1) "Abstract of title" or "abstract" means a written history, synopsis or summary of the

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recorded instruments affecting the title to real property.

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     (2) "Affiliate" means a specific person that directly, or indirectly through one or more

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intermediaries, controls, or is controlled by or is under common control with the person specified.

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     (3) "Bona fide employee of the title insurer or title insurance agent" means an individual

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who devotes substantially all of his or her time to performing services on behalf of a title insurer

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or title insurance agent and whose compensation for those services is in the form of salary or its

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equivalent paid by the title insurer or title insurance agent.

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     (4) "Commissioner" means the director of the department of business regulation, or his or

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her designee or the commissioner, director or superintendent of insurance in any other state.

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     (5) "Control" (including the terms "controlling," "controlled by" and "under common

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control with") means the possession, direct or indirect, of the power to direct or cause the direction

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of the management and policies of a person, whether through the ownership of voting securities,

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by contract other than a commercial contract for goods or nonmanagement services, or otherwise,

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unless the power is the result of an official position or corporate office held by the person. Control

 

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shall be presumed to exist if a person, directly or indirectly, owns, controls, holds with the power

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to vote, or holds proxies representing, ten percent (10%) or more of the voting securities of another

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person. This presumption may be rebutted by a showing that control does not exist in fact. The

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commissioner may determine, after furnishing all persons in interest notice and opportunity to be

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heard and making specific findings of fact to support the determination, that control exists in fact,

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notwithstanding the absence of a presumption to that effect.

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     (6) "Direct operations" means that portion of a title insurer's operations which are

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attributable to business written by a bona fide employee.

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     (7) "Escrow" means written instruments, money or other items deposited by one party with

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a depository, escrow agent or escrowee for delivery to another party upon the performance, of a

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specified condition or the happening of a certain event.

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     (8) "Escrow, settlement or closing fee" means the consideration for supervising or handling

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the actual execution, delivery or recording of transfer and lien documents and for disbursing funds.

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     (9) "Foreign title insurer" means any title insurer incorporated or organized under the laws

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of any other state of the United States, the District of Columbia, or any other jurisdiction of the

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United States.

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     (10) "Net retained liability" means the total liability retained by a title insurer for a single

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risk, after taking into account any ceded liability and collateral, acceptable to the commissioner,

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maintained by the insurer.

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     (11) "Non-U.S. title insurer" means any title insurer incorporated or organized under the

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laws of any foreign nation or any province or territory.

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     (12) "Person" means any natural person, partnership, association, cooperative, corporation,

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trust or other legal entity.

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     (13) "Producer" means any person, including any officer, director or owner of five percent

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(5%) or more of the equity or capital of any person, engaged in this state in the trade, business,

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occupation or profession of:

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     (i) Buying or selling interests in real property;

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     (ii) Making loans secured by interests in real property; or

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     (iii) Acting as broker, agent, representative or attorney or a person who buys or sells any

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interest in real property or who lends or borrows money with the interest as security.

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     (14) "Qualified financial institution" means an institution that is:

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     (i) Organized or (in the case of a United States branch or agency office of a foreign banking

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organization) licensed under the laws of the United States or any state and has been granted

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authority to operate with fiduciary powers;

 

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     (ii) Regulated, supervised and examined by federal or state authorities having regulatory

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authority over banks and trust companies;

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     (iii) Insured by the appropriate federal entity; and

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     (iv) Qualified under any additional rules established by the commissioner.

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     (15) "Security" or "security deposit" means funds or other property received by the title

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insurer as collateral to secure an indemnitor's obligation under an indemnity agreement pursuant to

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which the insurer is granted a perfected security interest in the collateral in exchange for agreeing

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to provide coverage in a title insurance policy for a specific title exception to coverage.

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     (16) "Subsidiary" means an affiliate controlled by a person directly or indirectly through

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one or more intermediaries.

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     (17) "Title insurance agent" or "agent" means any person authorized, in writing, by a title

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insurer an authorized person, other than a bona fide employee of the title insurer who, on behalf of

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the title insurer, performs the following acts, in conjunction with the issuance of a title insurance

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report or policy:

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     (i) Determines insurability and where applicable, marketability, and issues title insurance

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reports or policies, or both, based upon the performance or review of a search or abstract of title;

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provided that, any determination of marketability shall be made by an attorney, licensed to practice in

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the State of Rhode Island, who is engaged or employed by the title insurance agent; and

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     (ii) Performs one or more of the following functions:

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     (A) Collects or disburses premiums, escrow or security deposits or other funds;

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     (B) Handles escrows, settlements or closings;

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     (C) Solicits or negotiates title insurance business; or

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     (D) Records closing documents.

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     (18) “Continuing education” means a minimum of ten (10) hours of continuing education

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credit, every two (2) years, in title insurance and escrow management specific to this state and

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approved by the department of business regulation, which shall include at least three (3) hours of

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continuing education on the subject matter of ethics, rules, or compliance with state and federal

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regulations relating specifically to title insurance and closing services.

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     (i) Compliance with continuing education requirements is a condition precedent to the

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issuance, continuation, reinstatement, or renewal of any resident licensee subject to this section.

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     (ii) A nonresident person shall receive a nonresident license if:

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     (A) The person is currently licensed as a resident agent and is in good standing in his or

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her home state;

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     (B) The person has submitted the proper request for licensure and has paid the required

 

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fees;

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     (C) The person has submitted or transmitted to the department the appropriate, completed

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application for licensure for the equivalent type of license and lines of authority;

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     (D) The insurance commissioner may verify the licensee’s licensing status through the

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database maintained by the NAIC, its affiliates, or subsidiaries; and

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     (E) As a condition to continuation of a license issued under this section, the licensee shall

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maintain a resident license in his or her home state. The nonresident license issued under this

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section shall terminate and be surrendered immediately if the home state license terminates for any

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reason, unless the licensee has been issued a license as a resident title insurance agent in his or her

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new home state. Notification to any state where a nonresident license is issued must be made as

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soon as possible, but no later than thirty (30) days, of change in new state resident license. The

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licensee shall include their new and old addresses in the notification to the department. A new state

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resident license is required for nonresident licenses to remain valid. The new state resident license

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must have reciprocity with the licensing nonresident state(s) for the nonresident license not to

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terminate.

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     (iii) If neither the state in which the licensee maintains the principal place of residence,

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nor the state in which the licensee maintains the principal place of business, has a substantially

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similar law governing licensees, the licensee may declare another state in which it becomes licensed

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and acts as a licensee to be their home state.

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     (18)(19) "Title insurance business" or "business of title insurance" means":

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     (i) Issuing as insurer or offering to issue as insurer, a title insurance policy;

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     (ii) Transacting or proposing to transact by a title insurer any of the following activities

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when conducted or performed in contemplation of, or in conjunction with, the issuance of a title

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insurance policy:

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     (A) Soliciting or negotiating the issuance of a title insurance policy;

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     (B) Guaranteeing, warranting or otherwise insuring the correctness of title searches for all

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instruments affecting titles to real property, any interest in real property, cooperative units and

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proprietary leases and for all liens or charges affecting the same;

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     (C) Handling of escrows, settlements or closings;

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     (D) Executing title insurance policies;

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     (E) Effecting contracts of reinsurance.

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     (iii) Guaranteeing, warranting or insuring searches or examination of title to real property

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or any interest in real property;

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     (iv) Guaranteeing or warranting the status of title as to ownership of or liens on real

 

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property and personal property by any person other than the principals to the transaction; or

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     (v) Doing or proposing to do any business substantially equivalent to any of the activities

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listed in this subsection in a manner designed to evade the provisions of this chapter.

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     (19)(20) "Title insurance policy" or "policy" means a contract insuring or indemnifying

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owners of, or other persons lawfully interested in, real or personal property or any interest in real

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property, against loss or damage arising from any or all of the following conditions existing and

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not excepted or excluded:

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     (i) Defects in or liens or encumbrances on the insured title;

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     (ii) Unmarketability of the insured title;

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     (iii) Invalidity, lack of priority or unenforceability of liens or encumbrances on the stated

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property;

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     (iv) Lack of legal right of access to the land; or

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     (v) Unenforceability of rights in title to the land.

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     (20)(21) "Title insurer" or "insurer" means a company organized under laws of this state

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for the purpose of transacting the business of title insurance and any foreign or non-United States

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title insurer licensed in this state to transact the business of title insurance.

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     (21)(22) "Title plant" means a set of records consisting of documents, maps, surveys or

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entries affecting title to real property or any interest in or encumbrance on the property, which have

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been filed or recorded in the jurisdiction for which the title plant is established or maintained.

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     27-2.6-16. Premium rate filings and standards.

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     No title insurer may charge any rates regulated by the state after the effective date of this

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act, except in accordance with the premium rate schedule and manuals filed with and approved by

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the commissioner in accordance with the provisions of chapter 44 of this title. No title insurer may

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reduce or discount the amount of the title insurance premium from the gross title premium set forth

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in the manual so filed and approved, except in accordance with a refinance or reissue rate as set

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forth in the manual. For insurance amounts higher than any amount specifically set forth in the title

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insurer’s rate manual, the gross premium shall be calculated at the same rate per thousand dollars

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of insurance for the highest stated amount set forth in the manual. Only licensed title agents are

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entitled to receive, collect and share in any title insurance premiums, or any portion thereof.

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     SECTION 2. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO INSURANCE -- RHODE ISLAND TITLE INSURERS ACT

***

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     This act would provide that only attorneys licensed in the State of Rhode Island can act as title

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insurance agents and only they can determine insurability and marketability of the subject property. It

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would also provide that no title insurers can discount title insurance premiums as set forth in rate

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manuals and prohibits sharing fees from the premiums except between licensed title agents and

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licensed attorneys.

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     This act would take effect upon passage.

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