June 25, 1979

Mr. Lowell L. Knutson 
Director of Insurance 
Insurance Building 
Pierre, South Dakota 57501

Official Opinion No. 79-18

Countersignature fees applicable to title insurance policies

Dear Mr. Knutson:

You have requested an official opinion from this office based upon the following facts:

FACTS: 

With the amendment of SDCL 58-25-16 by the 1979 legislature, there have arisen several questions relative to the setting of fees for countersignatures in reference to title insurance.  This necessitates my informal request for your advice relative to this problem. 

SDCL 58-25-16 provides: 

Foreign insurer-Countersignature requirements-Violation as misdemeanor.  No foreign insurance company shall issue any policy of title insurance or certificate of title or other guarantee of title, covering any property located within the State of South Dakota, unless the same is countersigned by a person, partnership or corporation, who has met the requirements of § §  36-13-8 and 36-13-10.  Violation of this section is a Class 2 misdemeanor. 

During the last session of the Legislature, House Bill No. 1119 was passed which provides: 

58-25-16.  No insurance company shall issue any policy of title insurance or certificate of title or other guarantee of title, covering any property located within the State of South Dakota, unless the same is countersigned by a person, partnership or corporation, who has met the requirements of § §  36-13-8 and 36-13-10 in the county in which the real property is located, or maintains an abstract plant in the county where the real property is located and meets the requirements of chapter 36-13.  A violation of this section is a Class 2 misdemeanor. 

The Legislature, by virtue of SDCL 58-6-3, has preempted the field of regulation of insurance companies and its agents and vested the administration of its laws under the direction and supervision of the Division of Insurance to be under the supervision of the Department of Commerce. 

SDCL 58-6-63 provides and regulates the compensation for the service of countersigning policies. 

Licensed resident general lines agent countersigning policy for licensed non-resident broker--Compensation for services, record of amount, waiver. The licensed resident general lines agent when countersigning for a licensed nonresident broker shall receive for this service five per cent of the total premium or twenty-five per cent of the commission whichever is less and said resident agent shall enter the payment and the amount thereof on his record to the end that the state may receive the tax required by law to be paid on the premiums collected for such insurance and contracts involving persons, property and matters resident or located within this state and the laws relating to rebating may be properly enforced. Notwithstanding the foregoing, it shall be permissible at the option of the resident agent only to waive countersignature fees of less than two dollars.

Based on the above facts, you ask the following questions:

QUESTIONS: 

1.  Whether or not SDCL 58-6-63 fixes the compensation for a person, partnership or corporation who countersigns the policy of title insurance as provided by SDCL 58-25-16 (HB 1119)? 

2.  If your answer is in the negative, does the Division of Insurance, acting by and through the Department of Commerce, have the authority and jurisdiction to hold hearings to adopt a rule to fix the fee that can be charged for the countersignature required by SDCL 58-25-16? 

3.  If your answer is affirmative, does SDCL 58-6-63 provide a maximum fee which can be set by the Division of Insurance acting by and through the Department of Commerce in fixing the countersignature fee under SDCL 58-25-16 in reference to title insurance policies?

IN RE QUESTION NO. 1:

In my view, the answer to your first question is no.  The provisions of SDCL 58-6-63 do not appear to me to apply to SDCL 58-25-16.

IN RE QUESTION NO. 2:

In my opinion, the answer to your second question is yes.

SDCL 58-4-1 authorizes the Director of the Division of Insurance to make reasonable rules to administer the provisions of Title 58. This indicates in my view, under present law, the authority to make rules regarding rates to be charged under § 58-25-16.

In this regard I believe that it is important to note the provisions of  § 58-25-16 presently require a “countersignature” of a licensed abstractor.  This appears to me to be something less than a requirement for a “cosignature” of such a licensed abstractor. Thus, this matter would appear to properly be regulated by the Insurance Division as it is quite obviously an element that will be built into the overall rate structure which is regulated by the Insurance Division.

IN RE QUESTION NO. 3:

The answer to your third question is no.  I see no such relationship between SDCL 58-6-63 and 58-25-16.

Respectfully submitted,

Mark V. Meierhenry
Attorney General

MVM:DOC:esp