After I posted above, I realized that I actually KNEW someone who worked at US Land Title.  That doesn't actually change my feelings.  I still have a hard time seeing WHY there would need to be a fall-through since someone somewhere ordered a search--whether or not it closed, someone somewhere is getting paid for it. 

Although we don't do their work ourselves, it appears that you are absolutely correct--that their terms depend on WHERE the search is being performed.  Clearly, the terms they are asking of you are because of the competition THEY are also fighting against.  Although I still have to say that they shouldn't have those terms, if they aren't company-wide and are situation based (AND they are able to find QUALITY abstractors to comply), then I'd say give them a try.  It would appear to me that up-front negotiations would be the most important component to dealing with this company.