OGC Op. No. 11-02-11
The Office of General Counsel issued the following opinion on February 23, 2011 representing the position of the New York State Insurance Department.
Re: Certifying Abstract of Title
1) Does the issuance of a Certified Abstract constitute the doing of an insurance business?
2) Does the answer above change if the issuer of the Certified Abstract is an attorney?
1) Yes. The issuance of a Certified Abstract, in which a title agent includes a page that guarantees the correctness of the searches, constitutes the doing of a title insurance business. Accordingly, only an authorized title insurance corporation may issue such a certification, and the form of guaranty must be filed with the Superintendent in accordance with Articles 23 and 64 of the Insurance Law.
2) No. There is nothing in the Insurance Law that permits an attorney to do a title insurance business without being authorized by the Insurance Department.
The inquirer states that he is an attorney at the New York State Department of Taxation and Finance (“NYS DTF”). In September 2010, the NYS DTF issued a technical memorandum, TSB-M-10(7)S, which held that an abstract of title is an “information service” and is thus subject to sales tax under N.Y. Tax Law § 1105(c)(1). NYS DTF subsequently issued a Tax Bulletin (TB-ST-5), which provides that a “guaranteed title search” is not a taxable information service subject to sales tax, because that guaranty constitutes the doing of an insurance business.
In the wake of the Tax Bulletin’s release, NYS DTF received a petition for an advisory opinion from a title insurance agent, which asked whether a Certified Abstract stating that the items that it found were set forth in the abstract of title, and that “said items are correctly set forth, and that there is nothing more in said indexes which appears to affect the premises or any part thereof…” constituted a guaranteed abstract for the purpose of TSB-M-10(7)S. According to the NYS DTF, the question of whether a Certified Abstract would constitute a guaranteed abstract for the purpose of TB-ST-5 turns on whether the Certified Abstract constitutes the doing of an insurance business. In addition, the inquirer asks whether the Department’s Office of General Counsel (OGC) opinion would change if an attorney duly licensed to practice law in this state issued the Certified Abstract.
N.Y. Ins. Law § 6403 is relevant to the inquiry, and sets forth the management and powers of a title insurance corporation. That provision states, in part, that:
(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.
Thus, a title insurance corporation is authorized to guarantee the correctness of searches, and doing so is deemed doing an insurance business.
In addition, Insurance Law § 1102 prohibits any person, firm, association, corporation, or joint-stock company from doing an insurance business in this state unless authorized by a license in force pursuant to the provisions of the Insurance Law, or exempt from such a requirement.
Finally, Insurance Law § 1113 defines the kinds of insurance that may be authorized in this state, including “title insurance.” Insurance Law § 1113(a)(18) states that:
“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.
Here, the Certified Abstract states that: 1) the title insurance agent is providing the certification for “a valuable consideration paid to it”; 2) the items that the title insurance agent found are set forth in the abstract of title; and 3) the items are correctly set forth, and that there is nothing more in said indexes which appears to affect the premises or any part thereof.
The title insurance agent’s Certified Abstract guarantees the correctness of the searches performed by it and, as such, constitutes the doing of an insurance business pursuant to Insurance Law § 6403(b). 1 Therefore, in order to provide the Certified Abstract, the title insurance agent must be licensed as a title insurance corporation. In addition, the form of the guaranty must be filed with the Superintendent in accordance with Articles 23 and 64 of the Insurance Law.
The inquirer’s second question asks whether the answer differs if an attorney issues the Certified Abstract. It does not. There is nothing in the Insurance Law that permits an attorney to do a title insurance business without being authorized.
For further information, you may contact Senior Attorney Sapna Maloor at the New York City office.
1 However, the title insurance agent may make, issue, or furnish a search without guarantee or insurance thereof. See Insurance Law § 6408(a).