The office of General Counsel issued the following informal opinion on December 27, 2000, representing the position of the New York State Insurance Department.
Re: UCC Title Insurance Policy
May a title insurance company write a policy providing lenders' title insurance for loans secured by personal property under the Uniform Commercial Code?
A policy providing lenders title insurance for loans secured by personal property under the Uniform Commercial Code is substantially similar to title insurance and may be written only by a title insurance company.
An insurance company, XYZ Title Insurance Company ("XYZ") proposes to write a new insurance product. The policy would provide lenders title insurance for loans secured by personal property under the Uniform Commercial Code. The security for these loans would take the form of goods (such as inventory or equipment) fixtures, crops, accounts, etc. The loans made are generally commercial loans for business. The policy would provide insurance to a lender that its lien (security interest) in personal property has been validly created and properly filed with the appropriate governmental filing offices, and, if the borrower defaults on the loan, the lien is enforceable against and has priority over the interests of third parties.
N.Y. Ins. Law §1113(a)(18) (McKinney 2000) provides:
(18) "Title insurance," means insuring owners of, and other persons lawfully interested in, real property and chattels real against loss by reason of defective titles and encumbrances and insuring the correctness of searches for all instruments, liens or charges affecting the title to such property, including power to procure and furnish information relative thereto, and such other incidental powers as are specifically granted in this chapter.
N.Y. Ins. Law §1113(a)(30) (McKinney 2000) provides:
(30) "Substantially similar kind of insurance," means such insurance which in the opinion of the superintendent is determined to be substantially similar to one of the foregoing kinds of insurance and thereupon for the purposes of this chapter shall be deemed to be included in that kind of insurance.
The only difference between the coverage that XYZ proposes to provide and title insurance is that title insurance applies only to real property and chattels real, whereas XYZs policy would insure title to personal property.
This Office has on several occasions determined that a policy that insures the title in regard to personal property is substantially similar to title insurance, and may be written only by a title insurance company. Accordingly, XYZ may write such a policy.
Please note that this opinion addresses only the permissibility of an insurer writing such coverage in New York and the policy form has not been reviewed. In order to proceed, XYZ must file the policy forms and rates with the Property Bureau, in accordance with Article 23 and the usual procedures of the Bureau.
For further information you may contact Supervising Attorney Paul A. Zuckerman at the New York City Office.