Alabama Title Insurance Act

Dates of Birth of Individual Title Agents

Cancellation of Certificates of Authority

Renewal of Certificates of Authority

Here are several responses to recent questions regarding the new title insurance law:

• DEFINITION OF PREMIUM. [Section 3 of the Act, now Section 27-25-3]: It is clear from the definitions in Section 3 of the act, now Section 27-25-3, that a binder or commitment is not title insurance and the fee paid therefor is not premium. This is so even if a binder or commitment is used by a lender to support a construction loan and the lender never requests the issuance of the title policy because no insurance is actually issued.

  PLEASE NOTE: In Section 4(c) of the new law, now Section 27-25-4(c), the requirement to issue a policy within 60 days of the satisfaction of the commitment requirements only applies if the "premium has been collected."

• AGENT CERTIFICATE OF AUTHORITY [Section 4 of the Act, Now Section 27-25-4]: Upon the effective date of the act, October 1, 2001, a title insurance policy shall not be issued by an agent unless the insurer has first obtained a certificate of authority for the agent.
• NAME OF AGENT [Section 4 of the Act, now Section 27-25-4]: Title insurers should promptly notify the Department of a change in the name of a title agent. There is no charge for providing a name change, unless the insurer wants a new certificate of authority issued, which is $5.
• RESIDENCE OF AGENTS [Section 4 of the Act, Now Section 27-25-4]: Individual title insurance agents must be residents of the State of Alabama. Business entities must be formed under the laws of the State of Alabama, i.e., must be an Alabama corporation, Alabama limited liability company, etc. There is no limitation on who can "own" a title insurance agency; thus a non-resident individual can form an Alabama corporation, which can then be appointed as the Alabama title insurance agent, even though the individual is not qualified individually due to residence.
• QUALIFICATIONS OF A BUSINESS ENTITY AS TITLE AGENT [Section 4 of the Act, Now Section 27-25-4]: The position of the Alabama Department of Insurance is that a business entity exists under the laws of the state in which it is organized. It is clear to us that in the Alabama Title Insurance Act the legislative intent was to limit the authority to act as an agent for a title insurer to resident individual citizens of Alabama and to business entities organized under the laws of this state. It is not enough to be "qualified" to do business in Alabama. This is bolstered by language found in the Alabama Business Corporation Act, Section 10-2B-1.28, Code of Alabama 1975, whereby a domestic (Alabama) corporation can apply to the Alabama Secretary of State for a "certificate of existence," but a foreign corporation must apply for a "certificate of authorization." Thus it appears clear that while a foreign corporation may be authorized to do business in Alabama, only an Alabama corporation is "organized or existing under the laws of this state."

  Based on this position, this Department will only approve certificates of authority for title insurance agents as a corporation or other business entity if the corporation or other business entity is an Alabama-domiciled entity. Foreign corporations and other foreign business entities are not qualified to be licensed as a title insurance agent in Alabama.

• REISSUE CREDIT – Copy of Policy [Section 6(a) of the Act, Now Section 27-25-6(a)]: Title insurers are not required to file a "reissue rate," but if they do, one of the requirements to receive the reissue rate must be the production of the prior title insurance policy. It is the opinion of the Department that for purposes of this requirement, a photocopy of the prior policy is sufficient. From the language of the law, the production of the prior policy must include the policy "jacket" and all schedules. Agents are not allowed to give reissue credit except in compliance with this statutory requirement.
• REISSUE CREDIT – Type of Policy [Section 6(a) of the Act, Now Section 27-25-6(a)]: As indicated above, title insurers are not required to file for a "reissue rate." The only limitation in the statute regarding reissue rates is the requirement for the production of the prior title insurance policy. There is no limitation in the statute as to the type of insurance for which a reissue rate may be filed. Therefore, a title insurer may file an original rate and a reissue rate for any and all of its different types of policies offered in this state if it so desires. The title insurer may, for instance, require a prior owners policy to qualify for an owners reissue rate and a prior owners or mortgagee policy to qualify for a mortgagee reissue rate. Title insurers may also impose a time limitation, such as a prior policy written not more than ten years prior, on all such reissue credit.
• CONSTRUCTION RATES [Section 6 of the Act, Now Section 27-25-6]: A title insurer may file a separate rate for construction loans but is not required to do so. If no separate construction rate is filed and approved for a particular title insurer, the only rate available for a construction loan would be a mortgagee rate, assuming such a rate has been filed and approved.
• NOTICE OF OWNERS POLICY AVAILABILITY [Section 7 of the Act, Now Section 27-25-7]: In prior discussions, it was determined the Department would take the position the new title insurance act is to be enforced through Title Insurance Companies. In line with this decision, we will enforce Section 7 as being applicable only to title insurance companies. Clearly, the obligation in Subsection (a) is for the "title insurer" to either "obtain or cause its agent to obtain" the statement regarding the availability of owners coverage. We anticipate our regulation will determine this mandate as only applicable "in a transaction involving the purchase or sale of a fee simple or possessory interest in real property" wherein a mortgagee policy is being written.

  Based on this position, the owners title insurance availability disclosure is not required to be provided in transactions in which a mortgagee policy is not written. Thus, the disclosure form would not be required in the following examples:

  • An attorney, who happens to be a title insurance agent, prepares a deed but does not handle the "closing."
  • A person, who happens to be a title insurance agent, handles a closing in a transaction in which mortgagee title insurance was not written.
  A further question that has arisen is related to Paragraph (2) in Subsection (a) of Section 7, whereby the premium of the owners policy is to be disclosed. It is the position of the Department that it is not necessary to disclose all of the different owners policies that may be available. We understand the intent of the statute to be that consumers are to be informed of the availability of owners protection when mortgagee insurance is provided in a sale context. We feel that if a consumer expresses an interest based on the disclosure form, the agent may then wish to advise the consumer of any additional types of owners policies that may also be available.