Stewart Title Guaranty Company is pleased to report its participation in an Inter-Underwriter Indemnification Agreement ("Agreement"), effective April 1, 2010, with Fidelity National Title Insurance Company, for policies issued on Louisiana properties. The Agreement is open to all title insurers operating in Louisiana and we hope and expect other companies to participate. The purpose of such agreements, which we have executed in many other states, is to expedite closing where certain title defects exist, but which other signatories to such an agreement are liable and obligated to cure under existing title policies. This will eliminate the need to go to the indemnifying company prior to a closing in many transactions.
This Bulletin gives the details of the Agreement.
First, the upper limitation for the indemnity, and therefore the upper limit for monetary liens or property values, to be considered as Defects covered by the Agreement, as that term is defined in the Agreement, is $500,000. However, the amount of any indemnity is also limited by the amount of the Prior Policy if less than $500,000. If the title defect is greater than either limitation, the Agreement cannot be invoked and an individual indemnity is still required.
Second, the Defect must have been covered by the Prior Policy. In other words, the Prior Insurer must be liable for the full amount of the Defect. Thus, if the prior policy took exception to the Defect, there would be no indemnity. An Owner's policy issued by a Prior Insurer, shall be a Prior Policy and susceptable of being the basis for invoking the Agreement, when the insured under that Prior Policy is either the Seller with warranty of title, or the borrower in the current transaction. A prior loan policy, issued by the Prior Insurer, may be used as a Prior Policy to invoke this Agreement, only in the limited circumstance where the insured is the owner by forclosure or by deed in lieu, and is the seller with warranty of title.
Third, in order to rely on the Agreement, you must have and retain in your file the necessary Prior Policy and other pertinent documents, as well as state underwriter approval.
MATTERS COVERED BY THE AGREEMENT IN GENERAL:
a) Conveyance without joinder of a spouse if the grantor was married;
b) Liens arising from money judgments or unpaid construction costs where the lien period has clearly expired and the total construction was under $500,000, and federal and state tax liens.
c) Uncancelled mortgages, so long as they do not secure revolving credit or equity lines of credit. (Note: the uncancelled mortgage cannot have an amount such as "not to exceed $10,000,000 or some other sum in excess of the limitations of the Agreement.)
d) Lack of powers of attorney, resolutions, or court orders allowing an agent or representative to convey on behalf of another.
e) A document affecting title which was not properly executed, witnessed, notarized or recorded.
GENERAL CONDITIONS AND REQUIREMENTS OF COVERAGE:
a) The indemnitor's policy must contain no exception for the title defect. (You must review the Prior Policy to confirm this).
b) There must be no record of proceedings to enforce the judgment, lien, title objection, or to set aside the existing title. (You must examine the indexes of the local state district court to confirm this).
c) You must obtain permission from your state underwriter to rely on the Agreement to insure over one or more Defects referred to in items set forth above. To expedite these requests for indemnification, when you submit the request to your underwriter, include at least the following (i) an email or letter requesting the indemnification and explaining clearly the nature of the problem; (ii) a copy of the Prior Policy upon which you rely; (iii) a copy of your proposed commitment and policy(ies) to be issued by Stewart; and (iv) copies of the relevant instruments in question, such as proofs of payoff from the agent who issued the Prior Policy. Because you are likely to make this request at the last minute, you should take care to provide all necessary information in one package.
You should not rely on this Bulletin as direction for your examination, escrow, closing or settlement practices. If your escrow, closing or settlement practices do not permit you to rely on an indemnity, you should not do so.
WHEN AN AGENT EVOKES OUR INDEMNITY ON ONE OF YOUR FILES
The Agreement is a two-way street, and we may be requested by other signatories for curative work to fix a matter for which they have evoked indemnity under the Agreement. Our state underwriter will treat such a request as a claim and will review the situation with you, forwarding the matter to our claims personnel as appropriate for the matter. You will have a continuing duty in such cases to rectify the problem.
If you have questions related to this bulletin, please contact your local underwriting personnel or Stewart Legal Services.
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