DATE: April 5, 2023
TO: Massachusetts Agents and Approved Attorneys
FROM: Massachusetts Underwriting Department
RE: Agent Alert: Massachusetts BBO Issues Memorandum Concerning the Sale of Title Insurance Policies to Clients
Board of Bar Overseers Focuses on Disclosure and Consent Issues in Title Insurance
Conveyancing lawyers in Massachusetts have provided title insurance in connection with real estate transactions for decades, whether representing Buyers or Lenders. Rule 5.7, Comment  of the Massachusetts Rules of Professional Conduct (“MRPC”) recognizes the sale of title insurance as a “law-related service”.
The Board of Bar Overseers has recently circulated an article by Robert M. Daniszewski, Assistant Bar Counsel, entitled The Cost of Doing Business (With a Client). This article characterizes the providing of title insurance and other law-related services by an attorney as an “ancillary business transaction” that may “…be destabilizing to the attorney-client relationship by making it more difficult for the client to perceive the lawyer as a completely loyal and disinterested protector of the client’s interests.”
The article indicates that, to minimize these risks, the attorney must meet the conditions in MRPC Rule 1.8 (a), as follows:
- The transaction and terms are objectively fair and reasonable and are fully disclosed in writing that can be reasonably understood;
- the client is advised in writing to seek the advice of independent counsel in regard to the transaction; and
- the client gives written consent to the terms of the transaction, having been duly informed of the lawyers’ role in it, including whether the lawyer is purporting to represent the client in the transaction itself.
The article discusses the sale of title insurance in particular, stating in bold print: “Therefore, Massachusetts lawyers must comply with the provisions of Rule 1.8(a) in the sale of title insurance, even though Rule 1.8(a) imposes disclosure and consent requirements that go beyond what is currently required under applicable federal or state mortgage regulations.”
These compliance requirements for conveyancers are very specific:
(a) disclose to the buyer the cost of the policy;
(b) advise the clients of the desirability of seeking independent legal advice as to the purchase of the policy;
(c) clearly inform the clients of the lawyer’s role in the sale of the policy (which presumably includes disclosure of the lawyer’s share of the policy commission); and
(d) secure the clients’ written consent to the terms of the transaction.
Finally, the Memo says:
“Moreover, because Rule 1.8(a)(2) requires the lawyer to give the client a reasonable opportunity to seek the advice of independent counsel in the transaction, the client needs some advance notice in making an informed decision to purchase title insurance. It is not sufficient to secure the client’s written consent to the purchase of owner’s title insurance for the first time at or shortly before the closing, by presenting the client with a form to be signed along with the other purchase and mortgage documents. As discussed above, business transactions with a client, of which the sale of title insurance is a clear example, cannot be routinized in this fashion. To do so invites discipline. Seller beware.”
There is an Ethical Helpline provided by the BBO to answer questions regarding these rules. The Helpline is open Mondays, Wednesdays and Fridays from 2:00 to 4:00 p.m. The phone number is (617) 728-8750.
There are outside groups that may be able to assist with information on these issues. MASS LOMAP, a program by Lawyers Concerned for Lawyers, Massachusetts is one www.masslomap.org. The Real Estate Bar Association will present a session on these issues at its Spring Conference on May 1 www.reba.net.