Bulletin: KY2023004

Dear Associates:

We are pleased to announce that Stewart Title Guaranty Company has joined with various other title underwriters in executing the Kentucky Inter-Underwriter Indemnification Agreement (the “Agreement”). The Agreement (which can be found HERE) eliminates the need for transaction specific indemnity letters under limited, defined circumstances. Stewart Title and the following Kentucky Underwriters are parties to the agreement:

Doma Title Insurance Company
First American Title Insurance Company
Old Republic Title Insurance Company
Westcor Land Title Insurance Company
WFG National Title Insurance Company

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 Insurer”).

It is critical that you read the linked 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, 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.

In order to rely on the Agreement as indemnification for a known title defect, you must obtain 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 (See Section IV), subject to the Limitation of Indemnity 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, condominiums or community association liens and statutory liens for services, labor, or material.

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.

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 amount of indemnity to the lesser of:

(a) the extent of liability of the Prior Insurer under the Prior Policy; (b) the amount of insurance as defined in the Prior Policy; or (c) $500,000.00.

2. The Agreement does not apply if you have knowledge that any legal or other action has been taken regarding the defect (such as efforts to enforce a lien).

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 Insurer must be a signatory to the Agreement. If additional underwriters join in the Agreement, we will advise you by an update to this Bulletin.

6. The Current Insurer must provide notice of intent to rely on the Prior Policy to the Prior Insurer, within 30 days of the commitment’s issuance if the mortgage at issue appears to be a “gap” or future advance/revolving credit type mortgage.

For title defects 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.

For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.