Bulletin: MD2020001

Dear Associates:

Effective April 1, 2020, we are pleased to announce that Stewart Title Guaranty Company has joined with twelve other title underwriters in executing the Maryland Mutual Indemnity Agreement (the “Agreement”). The Agreement eliminates the need for transaction specific indemnity letters under limited, defined circumstances. Stewart Title and the following Maryland Underwriters are parties to the agreement:

The Agreement allows agents of participating title underwriters to issue owner’s or lender’s title policies without exception to certain known prior defects provided: (1) an owner’s (or in limited circumstances a lender’s title policy) has been previously issued by a participating underwriter; (2) the policy does not except to the specific title issue; and (3) the specific title issue is covered under the Agreement. If all these conditions are met, you do not need to obtain a 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.

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; except for home equity lines of credit and reverse mortgages.

b. Judgment liens, child support liens, condominium or homeowner’s association liens.

c. Liens for federal estate taxes or for state estate 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 (as defined in the Agreement).

f. 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.

g. A document affecting the Estate Insured not being properly created, executed, witnessed, sealed, acknowledged, notarized, delivered, or recorded in the Public Records (a “Technical Flaw”), excepting where the Technical Flaw results in a failure of title in whole or in part. The lack of a notary acknowledgement of a grantor or mortgagor or where the document is executed by an attorney and the power of attorney does not appear in the Public Records shall not be considered a Technical Flaw and is not covered by this Agreement.

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

1. The Agreement limits the amount of indemnity to the lesser: (a) the extent of liability of the Prior Insurer under the Prior Policy; (b) the face amount of the existing policy; and (c) $500,000.00.

a. 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.

b. If you are issuing a new title policy in an amount greater than either of those amounts, 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 regarding the defect (such as efforts to enforce a lien), you must contact underwriting counsel for guidance.

3. 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.

4. If the Prior Issuer’s policy is a lender’s policy, only liens listed in a – d above are covered by the Agreement and the following conditions must be met:

a. The insured, as defined by the Prior Policy, has subsequently acquired the Land by foreclosure or by deed-in-lieu of foreclosure;

b. The insured is the seller in the transaction that will be insured by the Current Policy; and 

c. The Current Policy is an owner’s policy issued to an unrelated insured.

5. 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.

For title defect covered under the Agreement, the Company requires that you retain in your files 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.

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

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