The Office of General Counsel issued the following opinion on May 10, 2004, representing the position of the New York State Insurance Department.
Re: Rate and Form Filing for Title Insurance Guarantees
Does a title search guarantee fall within the N.Y. Ins. Law § 6401(b) (McKinney 2000) definition of a title insurance policy so that the rates and forms therefor must be filed with the Superintendent pursuant to N.Y. Ins. Law § 6409(a) & (b) (McKinney 2000)?
A title search guarantee falls within N.Y. Ins. Law § 6401(b) (McKinney 2000) definition of a title insurance policy so that the rates and forms therefor must be filed with the Superintendent pursuant to N.Y. Ins. Law § 6409(a) & (b) (McKinney 2000).
On November 20, 2003, the Department issued an opinion that addressed, among other things, violations of the Insurance Law by some title insurers and abstract companies in Erie County. In response, the inquirer has asked that the Department reconsider its opinion therein that rates and forms for guaranteed searches be filed with the Superintendent. It is the inquirer's contention that Section 6409 of the Insurance Law does not require the filing of rates and forms for guaranteed searches because a guarantee is not a title insurance policy.
During a telephone conversation on March 31, 2004, among other things, this writer asked the inquirer what is being guaranteed when a search guarantee is issued. This writer also asked the inquirer to explain what events would trigger a loss. While it is still unclear from that discussion what a search guarantee involves, it is my understanding that a guarantee in Monroe County, where the inquirer is located, would indemnify an insured against loss as a result of defects such as a mortgage, lien or encumbrance, which was missed during the search.
In addition, the inquirer confirmed that ABC Abstract Company does not issue title search guarantees. The inquirer is also aware that abstract companies are not permitted to issue search guarantees in New York without being properly licensed.
The inquirer argues that N.Y. Ins. Law § 6409 (McKinney 2000) does not require the filing of rates and forms for guaranteed searches because a guarantee is not a title insurance policy. A title insurance policy is defined in N.Y. Ins. Law § 6401(b) (McKinney 2000) as follows:
(a) "Title insurance policy" means any policy or contract insuring or guaranteeing the owners of real property and chattels real and other persons interested therein, or having liens thereon, against loss by reason of encumbrances thereon and defective titles.
Further, N.Y. Ins. Law § 6409(a) & (b) (McKinney 2000) provides that:
(a) No title insurance policy shall be issued or delivered in this state, unless and until a copy of the form thereof shall have been filed with the superintendent for his information.
(b) Every title insurance corporation shall file with the superintendent its rate manual, if any, its basic schedule of rates and classification of risks, its rating plan and rules in connection with the writing or issuance of policies of title insurance and shall thereafter likewise file any changes therein. After any such filing no such corporation shall, in conjunction with the writing or issuance of any such policy, deviate from the rates, classifications of risks and rules last filed by the it, either by making any reduction in rates without having filed the same as herein provided, or by way of any discriminations in favor of or against any insured. The superintendent shall have the powers specified in article twenty-three1 of this chapter applicable to title insurers.
Whether termed a guarantee or otherwise, to the extent that a title insurer issues a policy or contract that guarantees the owners of real property and chattels real and other persons interested therein, or having liens thereon, against loss by reason of encumbrances thereon and defective titles, such guarantee constitutes a title insurance policy under Section 6401(b). Thus, the forms and rates therefor must be filed with the Superintendent pursuant to the requirements in Section 6409(a) & (b).
For further information you may contact Associate Attorney D. Monica Marsh at the New York City Office.
1See, N.Y. Ins. Law § 2305(b)(7) (McKinney Supp. 2004) which provides, in pertinent part, as follows:
(a) Except as otherwise provided in subsection (b) hereof or section two thousand three hundred eight of this article, prior approval of rates, rating plans, rating rules and rate manuals by the superintendent shall not be required.
(b) rate filings for:
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(7) title insurance;
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shall be filed with the superintendent and shall not become effective unless either the filing has been approved or thirty days, which the superintendent may with cause extend an additional thirty days and with further cause extend an additional fifteen days, have elapsed and the filing has not been disapproved as failing to meet the requirements of this article, including the standard that rates be not otherwise unreasonable .