"Consumers should be aware AOLs are being offered as substitutes for title insurance but they do not, and legally cannot, offer the same protection as title insurance, the letter states. The gap in coverage may leave consumers without protection that they believe they purchased. White states that as long as the AOL does not offer consumers coverage that meets the definition of insurance as outline in the Code of Virginia, it is not subject to his Bureau's regulation."
"According to White, traditional AOLs avoid being classified as insurance by not transferring the risk of loss related to the condition of the title to property, the status of any lien or encumbrance on property, or other matters affecting the title or right to the use and enjoyment of property. However, White said the Bureau of Insurance has been informed that some entities are offering products structured like AOLs that may meet the definition of insurance,' prompting him to publish this letter."
"To the extent that an AOL indemnifies the owner or lender for losses by reason of liens and encumbrances upon property, defects in the title to property, or other matters affecting the title to property or the right to the use and enjoyment of property caused by events outside of the attorney's control or covers losses unrelated to the opinion expressed in the AOL, then the AOL may be title insurance' and subject to the Bureau's regulation, the letter states."
Attorney opinion letters (AOLs) are being offered as substitutes for title insurance but do not and legally cannot provide the same protection, which can leave consumers without expected coverage. An AOL that does not meet the Code of Virginia definition of insurance is not regulated by the Bureau of Insurance. Companies that write insurance must hold a current annual license from the Commission and cannot hold licenses for additional classes if already licensed for these policies. Traditional AOLs avoid insurance classification by not transferring title-related risk. If an AOL indemnifies for liens, defects, encumbrances, or losses outside the attorney's control, it may constitute title insurance and be subject to regulation. Consumers should understand the differences between AOLs and title insurance, and companies should avoid engaging in the business of insurance without proper licensure.
Read at www.housingwire.com
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