TN| The Tennessee Department of Commerce and Insurance issued Bulletin 25-02 to clarify its position on the use of attorney opinion letters (AOLs) as substitutes for traditional title insurance. The Department emphasizes that while some AOLs may be permissible and not subject to insurance regulation, determining whether a specific AOL constitutes insurance requires a fact-specific analysis. Issuers are cautioned to avoid AOLs that function as insurance products, as these would be subject to state insurance laws.
Key Points:
- AOLs, prepared by licensed attorneys, provide assurances about property title status based on public records, but do not offer the same protections as traditional title insurance and may only be exempt from insurance regulation if their primary purpose is service rather than indemnity.
- Tennessee law distinguishes between service contracts and insurance contracts, applying a “service-indemnity test” to determine whether an AOL is regulated as insurance; AOLs that indemnify against losses outside the attorney’s control or are not ancillary to broader services are more likely to be considered insurance.
- The Department urges caution, advising that each AOL be carefully reviewed to ensure it does not constitute unauthorized insurance activity, as improper AOLs could trigger regulatory oversight under Tennessee title insurance statutes.