New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

The Office of General Counsel issued the following informal opinion on October 27, 2000, representing the position of the New York State Insurance Department.

Re: Abstract Companies and Title Insurance Business

Questions Presented:

1) May an Abstract Company guarantee its search of the County Clerk's public documents associated with real estate title?

2) Is an Abstract Company that provides abstracts of title (i.e., search of the County Clerk’s public documents associated with real estate title) doing a Title Insurance Business if it does not provide a financial guarantee of the correctness of its search?

Conclusions:

1) An Abstract Company may guarantee its search of the County Clerk's public documents associated with real estate title; however, the Abstract Company would then be doing a Title Insurance Business and be subject to the requirements of N.Y. Ins. Law Article 64 (McKinney 2000).

2) An Abstract Company is not doing a Title Insurance Business when it does not guarantee the correctness of its search of the County Clerk's public documents associated with real estate title.

Facts:

An Abstract Company searches the County Clerk's public documents associated with real estate title. The results of this search are utilized in the examination of real estate documents to render an opinion concerning title. Typically, a Real Estate Attorney would render such an opinion.

The Department was told that the Chairman of the Real Estate Committee of the XYZ County Bar Association has indicated that the XYZ County Real Estate Bar, through its control of real estate contracts, requires that the search of the County Clerk's public documents be guaranteed. The Department was questioned whether an Abstract Company can guarantee its search or whether such guarantee can only be provided by a licensed Title Insurer.

Analysis:

N.Y. Ins. Law § 6403(b)(1) (McKinney 2000) states:

(b) Every title insurance corporation shall, subject to the exceptions and restrictions contained in this chapter, have power to do, in addition to the powers granted by the business corporation law, only the following kinds or any of the kinds of business, of which those specified in paragraphs one and two hereof shall be deemed doing an insurance business:

(1) To make and to guarantee the correctness of searches for all instruments affecting titles to real property, chattels real, and cooperative units and proprietary leases, and for all liens or charges affecting the same.

N.Y. Ins. Law § 6408 (a) (McKinney 2000) (emphasis added) states:

(a) No person, firm, association or corporation shall engage in business as a title insurance corporation except pursuant to the provisions of this article. This prohibition shall not prevent the making, issuing, or furnishing of any abstract, search, examination, survey or certificate of title without guarantee or insurance thereof, nor the doing of any business specified in paragraphs three, four, five and six of subsection (b) of section six thousand four hundred three of this article.

Accordingly, an Abstract Company is not prohibited from guaranteeing the correctness of its search of the County Clerk's public documents associated with real estate title. However, such Abstract Company, providing a guarantee of the correctness of its search, would then be doing a Title Insurance Business and would have to comply with N.Y. Ins. Law Article 64 (McKinney 2000). An Abstract Company would not be doing a Title Insurance Business if it did not provide a financial guarantee of its search.

For further information you may contact Senior Attorney Robert Freedman at the New York City Office.