Bulletin: AL2012002

Dear Associates:

During the 2012 Session of the Alabama Legislature, HB 460 was enacted. It is now Act 2012-397 (hereinafter referred to as “Act”). It amends several sections to Title 27, Chapter 25 of the Code of Alabama (1975) and adds several new sections. The Alabama Department of Insurance has adopted regulations that implement the provisions of the Act. They became final on November 22, 2012, and are effective January 1, 2013, when the Act also becomes effective.

Briefly, the Act prohibits any individual or business entity from conducting the business of title insurance in Alabama unless licensed in accordance with Chapter 25 of Title 27. It establishes:

• qualifications and procedures for the licensing of all title insurance agents,
• a “brick and mortar” requirement for all title insurance agents doing business in the state;
• residency requirements for individuals who are agents or who are authorized signatories to title insurance commitments, policies and endorsements;
• requirements for signatories to commitments, policies and endorsements to also possess an individual license and to pass a written examination unless exempted;
• requirements for individual title insurance licensees to complete minimum continuing education on a biennial basis;
• authority for the Commissioner of Insurance to promulgate rules and provides the Commissioner to phase in the provisions of the Act.

A.    Definitions

The Act modified and added some definitions to Section 27-25-3:

1.     Business entity is defined as a domestic entity properly formed and existing under Title 10A (Section 27-25-3 (2));
2.     Individual is defined as a natural person (Section 27-25-3(4));
3.     Person is defined as an individual or business entity (Section 27-25-3(7)).

In addition, Rule 482-1-148-.02 adopts additional definitions:

1. Licensee - A title insurance agent licensed in accordance with Chapter 25 of Title 27 (482-1-148-.02(c));

2. Prelicensing Course - A course of study approved by the Commissioner as satisfying the prelicensing education requirements of Ala. Code § 27-25-4.3 and offered through a prelicensing course provider authorized by the Commissioner to issue certificates of course completion (Rule 482-1-148-.02(g)); and

3. Principal place of business – The place from which a business entity’s officers or other principals direct, control, and coordinate the entity’s business activities (482-1-148-.02(h)).

B.    Who can be a licensed title insurance agent under the Act?

In Alabama, agents basically conduct business in two different ways – as an individual in a sole proprietorship or through a business entity created under Title 10A of the Alabama Code, formerly Title 10. The Act does nothing to change that. It does, however, establish new licensing procedures for both.

1.     Sole Proprietorships

A sole proprietor seeking a license must meet the qualifications and follow the procedure established by Section 27-25-4.1, which requires the sole proprietor to:

(1)  be at least 19 years of age; and
(2)  be a bona fide resident and citizen of Alabama;
(3)  complete the pre-licensing course of study for title insurance as required in Section 27-25-4.3, unless exempt;
(2)  successfully pass the examination for title insurance as required in Section 27-25-4.3, unless exempt; and
(3)  pay the fees set forth in Section 27-25-4.7.

If an agency doing business as a sole proprietorship has additional staff that signs commitments, policies, and endorsements, those individuals are subject to the individual licensing requirements of Section 27-25-4.1. Licensed signatories are considered licensees under the Act, as well as the regulations, and must:

(1)  be at least 19 years of age; and
(2)  be a bona fide resident and citizen of Alabama;[1][1]
(3)  complete the pre-licensing course of study for title insurance as required in Section 27-25-4.3, unless exempt;
(2)  successfully pass the examination for title insurance as required in Section 27-25-4.3, unless exempt; and
(3)  pay the fees set forth in Section 27-25-4.7.

Section 27-25-4.3(c) established an exemption for individuals from the pre-test course of study and the examination requirement. If the individual has been, for a period of at least five (5) consecutive years preceding January 1, 2013, an authorized signatory to commitments, title insurance policies, and endorsements to title insurance policies issued by the title insurance agent on behalf of a title insurer properly authorized to conduct the business of title insurance in Alabama, the individual will be exempt from the pre-test course of study and the examination requirement. Individuals who are exempt from the pre-test course of study and the exam requirements must begin the application process with DOI on or before March 31, 2013. Otherwise, the exemption is lost and the individual who may have been exempt will be required to take the pre-test course and successfully pass the exam.

Individuals who are sole proprietors, and the employees of sole proprietors who sign commitments, policies, and endorsements, will use the on-line licensing process at www.aldoi.gov.

Section 482-1-148-.07 of the Regulations requires that the signature block on the commitments, policies and endorsements to include the license number for the issuing agent and of the individual signatory. This information must be printed or legibly written by hand underneath the signature.

2.     Business Entities

Business entities who are acting as title insurance agents must also be licensed. The business entity must be created under Title 10A of the Code, or pre-existing under the former Title 10, but the entity’s principal place of business must be physically located in Alabama. This “brick and mortar” provision is a significant change from the provisions of the 2001 legislation, which only required an entity to be created under what was then Title 10 of the Code.

Section 27-25-4.1(c) establishes the qualifications for agents who are business entities. Before approving the application, the commissioner must find that the business entity:

(1) is a domestic entity properly formed and existing under Title 10A, or the former Title10, and whose principal place of business is physically located in Alabama;
(2) has designated an individual title insurance licensee in this state as responsible for the business entity's regulatory compliance
(3) has not committed an act that is a ground for probation, suspension, revocation, or refusal of license as set forth in Section 27-25-4.5; and
(4) has paid the fees set forth in Section 27-25-4.7.

Principal place of business is defined in Reg. 482-1-148-.02(h) as the place from which a business entity’s officers or other principals direct, control, and coordinate the entity’s business activities.

In addition to the single individual licensee that is designated as being responsible for the business-entity-agent’s regulatory compliance, all signatories to commitments, policies and jackets are subject to the individual license requirements of Section 27-25-4.1. They must:

(1)  be at least 19 years of age; and
(2)  be a bona fide resident and citizen of Alabama;
(3)  complete the pre-licensing course of study for title insurance as required in Section 27-25-4.3, unless exempt;
(2)  successfully pass the examination for title insurance as required in Section 27-25-4.3, unless exempt; and
(3)  pay the fees set forth in Section 27-25-4.7.

Section 27-25-4 requires each signatory to a commitment, policy or endorsement to also include the name and license number of the title insurance agent to be printed or legibly written by hand underneath his or her signature.

Section 27-25-4.3(c) established an exemption for individuals from the pre-test course of study and the examination requirement. If the individual has been, for a period of at least five (5) consecutive years preceding January 1, 2013, an authorized signatory to commitments, title insurance policies, and endorsements to title insurance policies issued by the title insurance agent on behalf of a title insurer properly authorized to conduct the business of title insurance in Alabama, the individual will be exempt from the pre-test course of study and the examination requirement. Individuals who are exempt from the pre-test course of study and the exam requirements must begin the application process with DOI on or before March 31, 2013. Otherwise, the exemption is lost and the individual who may have been exempt will be required to take the pre-test course and successfully pass the exam.

Agents who conduct business as a business entity, and those within the agency who are required to be licensed will use the on-line licensing process at www.aldoi.gov.

Section 482-1-148-.07 of the Regulations requires that the signature block on the commitments, policies and endorsements include the license number for the issuing agent and of the individual signatory. This information must be printed or legibly written by hand underneath the signature.

C.    Pre-licensing Education and Exam

The pre-licensing education will be offered through The Koogler Group beginning in the first quarter of 2013. Examinations will begin July 1, 2013.

The Department of Insurance contracts with outside testing services to administer exams. These exams are taken electronically in approved proctored testing facilities located at strategic locations, including certain college campuses, throughout the state. Currently, the Department of Insurance has a contract with The University of Alabama System to administer all insurance pre-licensing examinations at its testing centers. The Department considers a grade of 70 or above on the exam as a passing grade.

Both the Act and the newly adopted regulations impose limitation on the ability to repeat the examination if the individual title insurance agent licensee is unsuccessful on the first attempt. The individual can take the exam twice without observing a waiting period between the first and second attempt. If the applicant is not successful on the second attempt at the exam, the individual applicant must wait 90 days before taking the exam for the third time. If the individual applicant is not successful on the third attempt, the applicant can take the exam twice again after a 90 day waiting period, but then must wait 180 days thereafter between each subsequent exam. After 24 months without taking an exam the waiting period expires.

Individual will receive exam results certificate upon passing exam, which should be provided to the Department upon request. Certificates issued in connection with the exam results are valid for one year after date of issuance. The exam fee is $75, and must be paid for each exam scheduled.

D.    Continuing Education

Section 27-25-4.4 establishes new continuing education requirements for individuals holding a title insurance agent’s license. Every individual who holds a title insurance agent license must satisfactorily complete a minimum of 24 hours of continuing education courses approved by the commissioner, of which three hours shall be in ethics, over a period of two (2) years. The continuing education credits are reported to the commissioner. There is an exemption for licensees not licensed for one full year prior to the end of the applicable continuing education biennium.

Only continuing education courses and providers approved by the commissioner can be used to satisfy the continuing education requirements established by this section.

E.    Implementation

Each title insurance agent certificate of authority in force prior to the effective date of the Act will be issued a replacement title insurance agent license and appointment upon payment of the annual fee in the amount set forth in Section 27-25-4. The issuance of a replacement title insurance agent license authorizes the agent to continue to issue title insurance policies in the same manner as permitted prior to this Act.

Replacement title insurance agent licenses will be valid for six months, during which time the agent, whether a business entity or individual, must satisfy the requirements for a title insurance agent license pursuant to Sections 27-25-4.1 and 27-25-4.3 discussed above. Since the administration of the title insurance licensing exam will not begin until July 1, 2013, the temporary license can be replaced with a “temporary license pending examination” not obtained, the latter of which is valid for three (3) months and cannot be renewed.

The commissioner has staggered the renewal periods for title insurance agent licenses over the first two calendar years following January 1, 2013. Certain licensees may be required to renew for one year at half of the biennial fee and continuing education requirements otherwise required under the Act (see Reg. 482-1-148).

F.    Time Line

10/1/12 to 12/31/12 – The renewal process begins for existing title agents. Title insurers will renew certificates of title for agents they wish to renew and cancel the certificates of title for agents not being renewed.

1/1/13 – All title insurance agents authorized by the renewal process mentioned above and not cancelled prior to 12/31/12 are issued “replacement” licenses and appointed with the title insurer.

1/1/13 to 3/31/2013 – Individuals within title insurance agencies exempt from exam requirement under Section 27-25-4.3(c)(1) must apply on or before March 31, 2013.

1/1/2013 to 6/30/2013 – Title agents with “replacement” license must apply for new license under new law. Initial appointments will transfer from replacement license to new license.

7/1/2013 – “Replacement” licenses expire if new license not issued or “temporary license pending examination” not obtained, the latter of which is valid for three (3) months and cannot be renewed.

7/1/2013 - The title insurance licensing exam becomes available.

1/1/2013 to 12/31/2015 – Commissioner has authority to delay enforcement of examination and fingerprint requirements. 

1/1/2014 to 12/31/2014 (and even years thereafter) – Individual title agents born in even-numbered years – license expires at end of birth month – can renew beginning 75 days prior to expiration. If renewed by expiration date, biennial license fee is $40 (must do 12 hours CE). If renewed within 30 days after expiration date, fee is $90 (must do CE – but renewal is retroactive to expiration date). If reinstated within 12 months of expiration, fee is $80 (must do CE but not exam – reinstatement effective as of reinstatement date).

10/1/2014 – 13/31/2014 (and even years thereafter) – Business entity title agent licenses expire 12/31 of even years – can renew beginning October 1 – biennial license fee is $100. If renewed within 30 days after expiration date, fee is $150 and renewal is retroactive to expiration date.

1/1/2015 to 12/31/2015 (and odd years thereafter) – Individual title agents born in odd-numbered years – license expires at end of birth month – can renew beginning 75 days prior to expiration. If renewed by expiration date, biennial license fee is $40 (must do 24 hours CE). If renewed within 30 days after expiration date, fee is $90 (must do CE – but renewal is retroactive to expiration date). If reinstated within 12 months of expiration, fee is $80 (must do CE but not exam – reinstatement effective as of reinstatement date).

G.  Additional Information

A complete copy of the Act can be seen at http://arc-sos.state.al.us/PAC/SOSACPDF.001/A0009499.PDF.

To learn even more about licensing, you can view a presentation on this topic at http://www.youtube.com/watch?v=6A1fasySqZY&feature=youtu.be. The regulations and other information are also available at http://www.aldoi.gov/Licensing/TitleInsurance.aspx

[1] In order to accommodate agents in the Alabama counties that border other states and who employ staff who are residents of a border state, the Act does permit non-resident individuals to seek and obtain a license if the nonresident individual can establish that he or she is a full-time employee of a duly licensed title insurance agent whose principal place of business is physically located in Alabama.

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