New York Court Holds Bank Selling a Property Did Not Violate Insurance Law by Requiring Property Purchaser to Obtain Title Insurance from a Specific Title Insurer

New York’s Second Department Appellate Term recently held that a bank did not violate Insurance Law § 2502(a)(2) when it required a property purchaser to obtain title insurance from a particular insurer because the bank was acting as a seller, not a lender.  See Wenig Saltiel, LLP v. Specialized Loan Servicing, LLC, 63 Misc. 3d 152(A) (N.Y. App. Term. 2019). In the case, plaintiff purchased a property from defendant Specialized Loan Servicing, LLC, who was an agent for defendant Deutsche Bank National Trust Company as Trustee for GSAA Home Equity Trust 2005-4.  After the purchase, plaintiff filed a complaint making a number of allegations about the sale, including that the defendants violated New York Insurance Law § 2502(a)(2), which states that “[s]tate chartered banking institutions and federally chartered banking institutions shall not extend credit, lease or sell property of any kind, or furnish any services, or fix or vary the consideration for any of the foregoing, on the condition or requirement that the customer obtain insurance from such institution, its affiliate or subsidiary, or a particular insurer, agent or broker[.]”  The trial court dismissed this cause of action. 

On appeal, the Court affirmed.  The Court found that Insurance Law § 2502(a)(2) “prohibits certain mortgage lenders from requiring borrowers to obtain title insurance from a specific title insurer, agent or broker as a condition precedent to receiving a loan.”  (emphasis added).  “As the transaction involved herein was between a seller and a purchaser of real property, that statute was not implicated.”

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Michael Crowley at mcrowley@riker.com, or Dylan Goetsch at dgoetsch@riker.com.