Dolgetta Law

Referral Arrangements: Real Estate Agents May Be Unknowingly Violating NYS Insurance Laws

In an opinion issued on May 31, 2011 (the “Opinion”), a senior attorney for the State of New York Insurance Department, Sapha S. Maloor, Esq., pointed out the very real risks real estate agents face when referring business to attorneys and title agencies in the normal course of their day-to-day work. (A copy of the Opinion can be found on the Insurance Department’s website at The Opinion points out that certain referral arrangements violate the Insurance Law and harsh penalties can be imposed as a result. This article will highlight the inherent conflicts and problems that arise when setting up formal or informal business referral arrangements between real estate agents, title agents and attorneys.

Real Estate Transactions in New York

In New York many real estate transactions involve the use of title agents or title agencies (as opposed to dealing directly with title insurance companies) which offer title insurance policies to prospective purchasers. It is customary for title agents, as well as other real estate professionals such as real estate agents, attorneys, lenders, home inspection companies, etc. to use referrals as a critical component of their businesses. Normally, a real estate agent will refer a client to a few different attorneys (usually three or more). Similarly, an attorney may refer a client to one or more real estate agents or brokers who have experience and expertise in a certain market or area in order to list and sell a client’s home.

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