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F I S C A L I M P A C T R E P O R T
SPONSOR McSorely
ORIGINAL DATE
LAST UPDATED
1/30/07
HB
SHORT TITLE Reasonable Care in Title Searches
SB 595
ANALYST Earnest
APPROPRIATION (dollars in thousands)
Appropriation
Recurring
or Non-Rec
Fund
Affected
FY07
FY08
NFI
NFI
(Parenthesis ( ) Indicate Expenditure Decreases)
Duplicates House Bill 254
SOURCES OF INFORMATION
LFC Files
Responses Received From
Public Regulation Commission (PRC)
Office of the Attorney General (AG)
Energy, Minerals, and Natural Resources Department (EMNRD)
SUMMARY
Synopsis of Bill
Senate Bill 595 amends Section 59A-30-11 of the insurance code to place liability on title
insurers for errors and mistakes in title search and examinations.
FISCAL IMPLICATIONS
None identified.
SIGNIFICANT ISSUES
This bill would allow a policyholder who has received reimbursement for a claim under his title
policy to pursue additional reimbursement by submitting a lawsuit against his title insurer for
failing to perform an accurate title search.
pg_0002
Senate Bill 595 – Page
2
AGO notes that, under the current law, a title insurance company authorized to do business in
New Mexico is immune from liability for the negligent performance of its statutorily mandated
duties. An insurer's liability presently is limited to the amount established by the title insurance
policy (generally, the price paid for the land). A title insurer does not have exposure for
traditional tort damages (broader than policy/contract damages) as a result of the exculpatory
language in the present version of § 59A-30-11(A), added in at 1999 amendment.
SB 595 proposes to strike the language added in 1999 and place liability solely on title insurers
for errors and mistakes in performing title searches and examinations. EMNRD finds that this
proposal should make clear that title insurers have an obligation to exercise reasonable care in
performing title searches and examinations and to remove any ambiguity in the law the 1999
amendment may have introduced regarding whether title insurers may be sued.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
Senate Bill 595 duplicates House Bill 254.
TECHNICAL ISSUES
AGO finds the word "solely" on page 2, line 7, to be ambiguous and confusing, and perhaps
unnecessary. Does the word mean that only the company will be liable for an agent's error and
the agent (personally) will be immune, or does it mean that the there will be no other liability
.
OTHER SUBSTANTIVE ISSUES
AGO provides the following example to illustrate the proposal under SB 595. A house insured
in 1980 for $150,000 is being sold. The owner discovers the title insurer failed to find a problem
with the title that has rendered the house virtually unmarketable. Since 1980, the house has
appreciated by $100,000. Under present law the owner's damages are limited to the $150,000 for
which the policy was written in 1980. However, under the proposed amendment, the title insurer
has exposure for not only the original purchase price of $150,000, but also for the lost
appreciation value of $100,000 that the owner would have realized had the sale closed, as well as
any other type of tort damage that the owner can prove.
According to EMNRD, their State Parks Division (SPD) acquires real property in connection
with administering state parks throughout New Mexico. As part of its real property acquisitions,
SPD requires title insurance to protect against adverse claims to the real property it acquires and
to identify and eliminate title defects. SPD must rely on the strength of title insurance policies it
holds (as the insured) and must be able to pursue claims against title insurance companies for any
failure of the title that may arise subsequent to the issuance of the policy. The same holds true for
any person, business entity, or other state agency or local public body that acquires title
insurance.
BE/mt