LIMITED LIABILITY CERTIFICATES
A limited liability certificate constitutes title insurance, so that a rate schedule for writing such certificates must be filed with the Insurance Commissioner. Abstract companies acting as agents of title companies who are not title insurers can only write title insurance through an authorized title insurer and not in their own name.
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June 23, 1955
Honorable W. A. Bugge
Director, Department of Highways
Olympia, Washington Cite as: AGO 55-57 No. 104
You indicated in your letter that some time ago an agreement was reached with the major title companies in the State of Washington, whereby limited liability certificates would be issued by the title companies for $12.50 for each certificate, together with an additional sum of $7.50 if the certificates were delivered to the state within the scheduled time limit. Liability under these certificates is limited to $500.00.
You indicated that this agreement has been in effect for some time but now the Lawyers Title, Washington Title, and Puget Sound Title Companies have stated that they will only write title insurance for the full value of the property to be acquired by the state highway department, alleging that the enclosed certificate does not conform to the rate schedule on file with the insurance commissioner, and that the abstract companies who are agents for the title companies cannot legally issue certificates in their own names, since the certificates constitute a form of title insurance.
[[Orig. Op. Page 2]]
You then asked our opinion as follows:
1. Does the attached limited liability certificate constitute title insurance?
2. If it is title insurance, can it be issued at the rates agreed upon in said agreement without violating the rate schedule or insurance code?
3. Can an abstract company which is only an agent of one of the major title insurance companies issue a limited liability certificate in its own name, or must such a certificate be underwritten through the home office?
Our conclusions are as follows:
1. A limited liability certificate in substantially the form outlined in your letter does constitute title insurance.
2. If the title companies have filed no rate which covers limited liability certificates, it is obvious that it would be a violation of the insurance companies' rate schedules to write the certificates. However, the title companies would not be precluded from filing such a rate with the Washington State insurance commissioner.
3. An abstract company, which is only an agent of a major title company and not a registered title company in its own right, cannot issue a limited liability certificate in its own name.
An examination of the title certificate enclosed with your letter of request clearly indicates that the certificate constitutes a contract of insurance, and as such is clearly a form of title insurance. It is self-evident that the insuring title company has recognized that it is, in effect, insuring the title of the property named to the extent such title is not encumbered by those encumbrances set forth in the certificate, to the limited amount of $500.00 for each certificate.
[[Orig. Op. Page 3]]
With respect to the second question, chapter 48.29 RCW sets forth the legal requirements for title insurers and, among other provisions, RCW 48.29.140 provides:
"(2) Each title insurer shall forthwith file with the commissioner a schedule showing the premium rates to be charged by it. Every addition to or modification of such schedule or of any rate therein contained shall likewise be filed with the commissioner, and no such addition or modification shall be effective until expiration of fifteen days after date of such filing."
It is apparent that subdivision (2) requires each title company to file with the insurance commissioner a schedule showing the premium rates to be charged, together with any modifications thereof. It is therefore apparent that the title companies are operating in violation of RCW 48.29.140,supra, if they have not filed a schedule of the rates to be charged pursuant to their limited liability certificate agreement with the State of Washington. It is clear, however, that this defect can be readily cured by the referenced title companies' filing a schedule of the agreed rates, which rates can become effective after the lapse of 15 days after the filing.
With respect to question 3, the certificates must be written through the home office unless the abstract company can qualify as a title company in its own right. Your attention is directed to RCW 48.29.010, which provides:
"(1) This chapter relates only to title insurers.
"(2) None of the provisions of this code shall be deemed to apply to persons engaged in the business of preparing and issuing abstracts of title to property and certifying to the correctness thereof so long as such persons do not guarantee or insure such titles."
In other words, if an abstract company desires to issue title certificates or title policies, it must qualify under the provisions of chapter 48.29 RCW as a title insurer. If the abstract company is operating as an agent of a title [[Orig. Op. Page 4]] insurance company, then the title insurance policy or certificate must be in the name of the registered title company and cannot be written under the separate name of the abstract company.
Our conclusions may be summarized as follows:
1. The limited liability certificate referred to in your letter does constitute a form of title insurance.
2. A title company issuing such certificates is violating the provisions of the laws of the State of Washington concerning title insurers until such time as a rate schedule is filed with the insurance commissioner.
3. An abstract company cannot write title insurance in its own name until it has likewise qualified as a title insurer, so that when such an abstract company is operating as an agent of a title company, the certificate must be written through the title company.
Very truly yours,
Assistant Attorney General