Bulletin: VA2015002

Dear Associates:

We are pleased to advise that Stewart Title Guaranty Company has joined with five other title underwriters in Virginia in executing an Inter-Underwriter Indemnification Agreement which will eliminate the need for transaction specific indemnity letters under limited, defined circumstances. Stewart Title participated in the finalization of this agreement and is a signatory together with the following Virginia Underwriters:

- Old Republic National Title Insurance Company

- Commonwealth Land Title Insurance Company

- Fidelity National Title Insurance Company

- Chicago Title Insurance Company

- First American Title Insurance Company

The Inter-Underwriter Indemnity Agreement (“Agreement”) allows agents of participating title underwriters to issue owner’s or lender’s title policies without exception to certain known prior defects provided an owner’s (or in limited circumstances a lender’s title policy) has been previously issued by a participating underwriter which does not except to the specific title issue, and provided further that the matter is covered under the Agreement. If all these conditions are met, you do not need to obtain a specific letter of indemnity from the indemnifying underwriter (referred to in the Agreement as the “Prior Issuer”).

It is critical that you read the attached copy of the Agreement carefully and understand it fully.While it covers a substantial portion of title defects for which a letter of indemnity would normally be required and will significantly streamline your processing, it only covers specific types of defects and has significant exceptions and conditions which will require you to request a traditional stand-alone letter of indemnity under certain circumstances. Please contact underwriting counsel if you have any questions as to the applicability of the Agreement.

In order to rely on the Agreement as indemnification for a known title defect, your file must contain a complete, signed copy of the Prior Insurer’s existing owner’s title policy (or a lender’s policy insuring a lender that is currently in title either through foreclosure or a deed in lieu of foreclosure). You may not rely on a representation that a policy will be provided, a “pro forma” policy, or a “marked-up” commitment. You must carefully review the Prior Insurer's policy. If the Prior Insurer's policy does not take exception to a known defect covered by the Agreement and the insured is your current seller or mortgagor, you may omit the known defect, pursuant to the Agreement.

Please note that you are not required to rely on the Agreement. You may continue to request written, stand-alone indemnity letters as you have in the past and should do so if coverage under the Agreement is unclear.

You will note that the Agreement covers the following categories of defects subject to the limitations in Section III and the conditions set forth in Section V of the Agreement:

a. Mortgages or Deeds of Trust that have not been effectively released, discharged or reconveyed.

b. Attachments, judgment liens, child support liens, condominium or community association liens and statutory liens for services, labor or material.

c. Liens for federal estate taxes or for state estate, transfer or inheritance taxes arising by reason of the death of previous owners of the Land.

d. Liens for other federal, state or municipal taxes.

e. Marital rights arising in favor of the spouses of previous owners of the Estate Insured.

f. Lack of authority or capacity of the grantor to convey the Estate Insured to the current or previous owner of the Land.

g. Failure of the Estate Insured to be effectively conveyed to the current or previous owner of the Land by reason of a defective judicial or administrative proceeding.

h. A document affecting the Estate Insured not being properly created, executed, witnessed, sealed, acknowledged, notarized, delivered, or recorded in the Public Records.

When reviewing the Agreement, please note the following major conditions and limitations: 

1- The Agreement limits the Prior Insurer’s liability to the face amount of the existing policy or $500,000.00, whichever is less. As such, the Agreement may not be relied on for purposes of indemnification for liens which exceed either the Prior Insurer’s policy limits or $500,000.00. Additionally, if you are issuing a new title policy in an amount greater than either of those amounts, and the known defect falls under categories (e) through (h), above, the protection afforded by the Agreement may be insufficient and you will need to consult with underwriting counsel.

2- If you have knowledge that any legal or other action has been taken with regard to the defect    (such as efforts to enforce a lien) you must contact underwriting counsel for guidance.

3- In order to rely on the Agreement, the Prior Issuer’s policy must be at least one year old. The participating underwriters agreed that title defects should be corrected whenever possible and that defects discovered within a year should be resolved.

4- The Prior Issuer’s policy may not be relied on if it provides affirmative coverage for the defect as opposed to failing to take exception to the defect.

5- If the Prior Issuer’s policy is a lender’s policy; the Agreement only applies to the first four categories of defects outlined above (i.e. liens).

6- The Prior Issuer must be a signatory to the Agreement. If additional underwriters join in the Agreement, we will advise you by an update to this Bulletin.

As long as the title defect is clearly covered under the Agreement, the only documentation you need to retain in your file is a complete copy of the Prior Insurer’s policy. Please note that whenever you are providing coverage for a known title defect, the defect should be disclosed in writing to the proposed insured and the proposed insured’s counsel, if any, and such disclosure should be documented in your file. 

Please contact underwriting counsel if you have any questions regarding the Agreement or its application to any specific transactions. 

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

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