Other Kinds John Rothermel and Heidi E. Junge April 19, 2018 The - - PowerPoint PPT Presentation

Welcome to today’s webinar!

Master Indemnities and Other Kinds

John Rothermel

and

Heidi E. Junge

April 19, 2018

The webinar will begin shortly.

Phone | 1-800-619-3315 Passcode | 4597908

• Your phones are muted. This allows a better recording.
• Q&A Process

Ask questions in two ways: 1. Use online chat feature during webinar 2. Send question via email to presenter or favorite Texas Underwriter

• In order to obtain a CE Certificate or CLE Credit, you must
• listen to the webinar for a minimum of 55 minutes
• btain the password (provided at the end of the presentation)
• follow the instructions as given

2

ATTORNEY INFORMATION

Because of opinions expressed by the Texas Department

• f Insurance (TDI) concerning rebates, legal credit is

available only to:  Attorneys who own title agencies that are Stewart Title Guaranty Agents  Attorneys employed by a title insurance agent licensed with Stewart Title Guaranty or Stewart entities  Fee attorneys who have an Escrow Officer license through a Stewart Title Agent or Stewart entity

We welcome any other lawyers to listen, but cannot provide continuing education credit to you.

3

Per the TDI and the State Bar, in order to obtain a CE Certificate or CLE Credit you must:

–listen to the webinar for a minimum of 55 minutes –obtain the password (provided at the end of the presentation) –follow the instructions as given

4

Master Indemnities & Other Kinds

John Rothermel

Senior Vice President Regional Underwriting Counsel Senior Underwriter

Heidi E. Junge

Assistant Vice President Underwriting Counsel Senior Underwriter SW Regional Underwriting Office Stewart Title Guaranty Company

Basis for Thinking about the Texas Master Indemnity: Our Obligations to the Consumer

P-11 “Insuring Around” “Insuring Around' is defined as the willful issuance of a title binder or title insurance policy showing no outstanding enforceable recorded liens while the Title Insurance Company knows that in fact a lien or liens are of record against the real property, and shall be prohibited, except under circumstances as the commissioner under his or her rulemaking powers shall approve. Why do we care?

P-11 “Insuring Around” continued…

A title insurance company knows that an outstanding enforceable recorded matter exists if it determines that the matter is valid and enforceable based on the examination of the title pursuant to which the title binder or title insurance policy is issued. Take Away: ‒ title insurance company KNOWS ‒ enforceable and recorded ‒ valid

P-11 “Insuring Around” continued…

“In its discretion, the title company may determine the insurability of title and those matters which it considers to be insurable under the title binder or title insurance policy; provided, however, that insuring around enforceable recorded liens shall be prohibited except as allowed by regulation.” The rest of the rule goes on to define “willful issuance” and what is and isn’t “insuring around”.

P-11b(6) Same Title Insurer is both the Prior Issuing Title Insurer and the Current Issuing Title Insurer

• 6. Where a title insurance company has previously issued

a policy without taking exception to a specific lien and is called upon to issue a new policy and is already

• bligated under such prior policy, and will not increase

its liability or exposure to the lien by the issuance of such new policy; provided the written consent of the Insureds (owner and mortgagee) shall be delivered to the title insurance company and retained in its files;

(Emphasis added)

P-11b(7) Different Title Insurers – Specific Indemnity

• 7. Where a title insurance company has erred as in (6)

above, and another title insurance company discovers the error in preparing to make a subsequent issuance, the second title insurance company may rely upon an indemnity agreement and/or an agreement to defend by the first company, and insure against such lien; provided the written consent of the Insureds (owner and mortgagee) shall be delivered to the title insurance company and retained in its files; (Emphasis added)

P-11b(10) Same Title Insurer – Master Indemnity T-29

10.When a title insurance company previously issues a policy without taking exception to matters covered by the Master Indemnity Agreement (T-29) and is called upon to issue a new policy and is already obligated under such prior policy, and will not increase its liability or exposure to some matter by the issuance of such new policy. Notice: NO requirement for written consent of the Insured.

P-11c Different Title Insurers—TX Master Indemnity

• c. "Texas Master Indemnity Agreement (T-29)" A title

insurance company may, in lieu of the execution of separate transaction specific indemnity letters or agreements, indemnify another title insurance company in accordance with P-11b(7) and/or P-11b(10) above by executing the Texas Master Indemnity Agreement (T-29). If a title insurance company elects to provide another title insurance company with a master indemnity agreement, the Texas Master Indemnity Agreement (T-29) must be used if the master indemnity agreement is intended to cover the liens and other matters set forth in the Texas Master Indemnity Agreement (T-29).

Texas Master Indemnity – What is it?

An agreement in the form of promulgated T-29 Who is the Agreement Between? Prior Issuing Title Insurer

– has issued a prior Owner’s Policy to the current title holder OR a Loan Policy to a Lender who later acquires the Insured land (becoming the Owner)

Current Issuing Title Insurer

– now has a transaction to insure and seeks indemnification of Potential Defects from the Issuing Title Insurer that didn’t take an exception in the prior policy

Who does Stewart Title Guaranty Company share a T-29 with?

Who is covered by Indemnities?

Title Insurers

– NOT agents or direct ops

Why?

– The Title Insurer has rights of subrogation under the policy.

Back story of the Texas Master Indemnity: A long time ago, in a galaxy far, far away…

• Back in the late 1990s, Fidelity created a form of Master

Indemnity used in Florida

• Stewart was getting 10-20 requests for Letters of

Indemnity each week

• TLTA underwriter members considered whether to adopt a

Master Indemnity in Texas

• But it needed to be simplified and tailored to Texas specific

potential defects

TEXAS MASTER INDEMNITY AGREEMENT FORM (T-29)

[Insert Name of Indemnifying Title Insurance Company] (hereinafter called in this Agreement "We"), subject to the terms, provisions, and conditions of this Agreement, agree to indemnify [Insert Name of Title Insurance Company Requesting the Indemnity] (hereinafter called in this Agreement "You") against loss, cost damage or expense You may suffer by relying on this Texas Master Indemnity Agreement (called in this Agreement "Agreement") because

• f those "POTENTIAL DEFECTS" described below, if:

• 1. We previously have issued: (i) an owners policy to the

current title holder; or (ii) a mortgagee policy to a lender who subsequently has acquired the insured land and is the seller or mortgagor in the current transaction and remains an insured under the mortgagee policy following foreclosure or a deed in lieu of foreclosure (hereinafter called in this Agreement "Our Policy");

• 2. Our Policy covers some or all of the land insured under

Your Policy (hereafter called in this Agreement the "Land"); and

• 3. Our Policy did not take exception to the POTENTIAL

DEFECTS.

POTENTIAL DEFECTS

I. Questions as to a Homestead interest in the Land II. Questions as to whether a recorded Abstract of Judgment Lien, Federal Lien or State Tax Lien applies to a prior owner or has been satisfied or released. III. Questions as to whether a recorded mortgage or other consensual lien, including but not limited to a vendor's lien, deed of trust, mechanic's lien contract, home equity lien, reverse mortgage, or

• welty lien (hereinafter called in this Agreement a "Mortgage") has

been satisfied or released;

POTENTIAL DEFECTS (cont.)

IV. Questions as to whether a trustee or attorney in fact had the proper authority to convey the title to the Land to the current insured owner

• r a predecessor in title;
• V. Questions as to the authority of an executor/executrix, or

administrator/administratrix to convey the title to the Land to the current insured owner or a predecessor in title.

HOMESTEAD Item I above applies when a deed in the chain of title to the Land, prior to or contemporaneously with Our Policy, does not contain either:

• 1. Joinder by the spouse of the grantor; or
• 2. A statement on the deed that the grantor is a single person; or
• 3. A statement on the deed or other recorded instrument that the

Land conveyed by the deed is not the homestead of the grantor; or

• 4. A statement that the property is community property under the

sole management and control of the grantor.

JUDGMENT LIENS OR FEDERAL OR STATE LIENS Item II above applies to a recorded judgment lien(s), including a federal judgment lien(s) or a federal lien(s) securing the payment of a criminal fine/restitution pursuant to 18 USC §3613 or appropriate state law, when the lien or judgment states what appears to be a sum certain, or when a recorded federal tax lien(s) or state tax lien(s) were recorded prior to the date of Our Policy; if 1. The Lien(s) are not against the insured under Our Policy; 2. The face amount of the Lien(s), exclusive of costs, interest and attorneys' fees, do not exceed $500,000.00; and 3. No notice of any proceedings or levy to collect the Lien(s) have been recorded 4. We did not take exception to such Lien(s) in Our Policy

JUDGMENT LIENS OR FEDERAL OR STATE LIENS (cont.) "State tax lien shall not include: (i) any lien securing the payment of ad valorem taxes; and/or (ii) any municipal/city or county lien for weed or sanitary liens, demolition liens, street assessment or paving liens, and/or utility service liens or other similar matters.”

MORTGAGES Item III above applies when a recorded Mortgage(s) was recorded prior to the date of Our Policy if: 1. No foreclosure proceedings respecting the Mortgage(s) have been recorded; 2. No Mortgage(s) secure a principal amount of more that $500,000.00; and 3. We did not except to such Mortgage(s) in Our Policy.

AUTHORITY OF TRUSTEES AND ATTORNEYS IN FACT Item IV above applies when your search of the title finds insufficient or no recorded evidence of the power or authority of the conveying trustee or attorney in fact to make the conveyance of the Land, provided that there is no notice of record in the county where the Land lies of any proceeding to attack or set aside the conveyance by the trustee or attorney in fact. Item IV applies when Our Policy insures the current seller or mortgagor

• f the Land.

So we have the question as to whether technical defects years ago in a Trustee’s deed after foreclosure is covered by the master indemnity. You will note above that the form itself only says “power or authority of the conveying trustee”. It is certainly broad enough to encompass a trustee of a deed of trust.

AUTHORITY OF EXECUTOR OR ADMINISTRATOR Item V above applies when your search of title finds insufficient or no recorded evidence of the power or authority of the conveying executor/executrix or administrator/administratrix to sell and convey the Land, provided that there is no notice of record in the county where the Land lies of any proceeding to attack or set aside the conveyance by the executor/executrix or administrator/administratrix. Item V applies when Our Policy insures the current seller or mortgagor of the Land.

What potential defects are NOT covered by the T-29 Master Indemnity?

• Missed interests—may decide to insure using P-39
• Power of Attorney used for conveyance, but no Power of

Attorney filed

• Legal description problems
• Mechanic’s liens
• Development loans by subdivider when you are insuring
• nly a single home.
• Large commercial loans

CONDITIONS The indemnity provisions of this Texas Master Indemnity Agreement are subject to the following conditions: 1. The agreement is only applicable to policies issued on Texas property. 2. You are not required to authenticate Our Policy that appears valid on its face. However, if We request, You agree to provide a copy of Our Policy as a condition to making a claim under this Agreement. 3. Our liability is limited to the face amount of Our Policy or $500,000.00, whichever is less, subject to the terms and conditions

• f Our Policy, and shall not enlarge Our liability and obligations

beyond those provided in Our Policy Please note that this is standard language and is used since the form is an agreement between underwriters.

4. You agree to notify Us of a claim under this Agreement as if You were an insured claimant under Our Policy. The notice should be sent by: (i) certified mail, return receipt requested, to: [Insert Mailing Address of the Indemnifying Title Insurance Company] Such notice shall be given as soon as possible after receipt by You of a notice of claim under Your Policy, but in no event, more than thirty (30) days

• thereafter. Provided, however, a notice provided after such 30 day

notice period may still be timely, so long as We are not prejudiced by any delay in giving such notice. 5. If any claim is made under this Agreement, You agree to perform in accordance with the terms hereof, promptly and in good faith. However, until We are notified of a claim hereunder, there is no

• bligation to take any action allowed or required under Our Policy.

Please note that this is standard language and is used since the form is an agreement between underwriters.

6. This Agreement may be supplemented or superseded by a specific written indemnity by and between You and Us and such specific agreement shall not be deemed to suspend, cancel, or otherwise terminate any of the rights or obligations of Yours or Ours under this Agreement as to policies which may be written by You in the future. 7. We may cancel this Agreement by giving written notice to You thirty (30) days after the date We mail such notice. However, it is agreed that such cancellation shall not diminish or impair any of the indemnities arising under this Agreement prior to the expiration of such thirty (30) day period. Please note that this is standard language and is used since the form is an agreement between underwriters.

8. This Agreement applies when We, the signatory to this Agreement, have issued: (i) an owners title policy to the transferor or mortgagor

• f the Land in the current transaction; or (ii) a mortgage title policy to

a lender who has acquired the title, is the seller or mortgagor in the current transaction, and remains an insured under the policy following foreclosure or a deed in lieu of foreclosure. For this indemnity to apply, you must have issued a title policy to the transferee or mortgagee of Our Insured. We and You understand and agree this agreement shall continue in force so long as You have liability under Your Policy or under its Indemnity(ies) to subsequent insurers for a POTENTIAL DEFECT covered by Our Policy subject to the terms and conditions of this Agreement. Please note that this is standard language and is used since the form is an agreement between underwriters.

How do I determine if reliance on a T-29 is permissible when issuing a policy?

• Do you have a copy of the other insurer’s Owner’s Policy
• r if the property has been foreclosed, Loan Policy?
• Does Stewart share a T-29 with the other title insurer?
• Is the matter at issue on your Commitment excepted to in

the other title insurer’s policy?

Master Indemnity – Homestead Issues

• Is the property residential property as defined in P-1u?
• Has the spouse of the owner joined in all deeds, including

the transaction insured on the other insurer’s policy?

• Are there conveyances that fail to state whether the

property is the homestead of the grantors?

• Are there conveyances that fail to state whether the

property is community property under the sole management and control of the grantor?

Master Indemnity – Abstract of Judgment (AJ), Federal Tax Lien (FTL), State Tax Lien (STL)

Against a prior owner with a similar name and no release is found:

• Does the face amount of the AJ, FTL or STL exceed

$500,000?

• Is there a notice of foreclosure (judicial or non-judicial)

recorded?

• Is the lien excepted to in the other title insurer’s prior

policy?

Master Indemnity – Mortgages, Deeds of Trust, Mechanic’s Lien Contracts, Other Consensual Liens

• Does the face amount of the lien exceed $500,000?
• Is there a notice of foreclosure (judicial or non-judicial)

recorded?

• Does the mortgage secure a revolving debt?
• Do you have any information that the debtor is in

bankruptcy?

• Is the lien excepted to in the other title insurer’s prior

policy?

The T-29 will most likely not cover any lawsuit court proceedings appearing from a search. Please contact a Texas Underwriter with any questions.

Master Indemnity – Trustee, Agent or Attorney- in-Fact Under a Power of Attorney (POA), Executor/trix or Administrator/trix of an Estate

Signed a conveyance instrument in the chain of title:

• Did they have AUTHORITY for this particular transaction?
• If a POA, was it recorded?
• Is there notice of any proceeding attacking the title?
• Is the notice of appointment of executor/administrator filed

in the real property records of the county where the land is located?

• Does the other title insurer’s prior policy insure someone
• ther than the current seller or lender of the property?

OK – So my issue isn’t covered under the Master Indemnity, what about a Specific Indemnity?

• When an issue isn’t covered by the Master Indemnity, a

Specific Indemnity can be requested by a title insurer that previously issued a policy without taking exception to the issue.

• Specific Indemnity requests for Stewart Title Guaranty

Company are handled by Charles M. Craig. ccraig@stewart.com

• If you are being asked to issue another Stewart policy and

not requested to issue on another company, no indemnity is required and we may decide to use express insurance.

Express Insurance Under P-39

• Express insurance language is promulgated language and

deals with liens, title defects, and survey matters.

• Company insures the insured against loss, if any,

sustained by the insured under the terms of this Policy by reason of a final, non-appealable judgment of a court of competent jurisdiction that orders the removal of this improvement because it encroaches over or into ____________________. Company agrees to provide defense to the insured in accordance with the terms of this Policy if suit is brought against the insured to require the removal of this improvement because it encroaches as herein stated.

P-39 Possible Defects

P-39b Company insures the Insured against loss, if any, sustained by the insured under the terms of this Policy by reason of a final, non-appealable judgment of a court of competent jurisdiction that divests the Insured of its interest as Insured because of this right, claim, or interest. Company agrees to provide defense to the Insured in accordance with the terms

• f this Policy if suit is brought against the Insured to divest

the Insured of its interests as Insured because of this right, claim, or interest.

P-39 Liens

P-39c.2 2. If Company then determines to issue with exception to the lien after

• therwise complying with P-11, it may, pursuant to Procedural Rule

P-5, show the lien in Schedule B and may state one of the following: a) If the Lien may only be foreclosed judicially: "Company insures the Insured against loss, if any, sustained by the insured under the terms of this Policy by reason of a final, non- appealable judgment of a court of competent jurisdiction that orders foreclosure of said lien on the land. Company agrees to provide defense to the Insured in accordance with the terms of this Policy if suit is brought against the insured to foreclose said lien on the land." OR

P-39 Liens

b) If the lien may be foreclosed nonjudicially: “Company insures the Insured against loss, if any, sustained by the insured under the terms of this Policy by reason of a foreclosure of said lien on the land. Company agrees to provide defense to the Insured in accordance with the terms of this Policy if suit is brought against the insured to foreclose said lien on the land and to take action in accordance with the terms of the policy if the holder of the lien commences a foreclosure action based on said lien.” The provisions of this Rule shall not modify or diminish the requirements

• f P-11.

Why use express insurance?

• Allows us to craft an appropriate exception and then

provide title insurance coverage

• Title insurance coverage after disclosure to the insured

– Isn’t insuring around (since notice) – Doesn’t require an active cure (rather may rely instead on the passage of time to cure)

When is it appropriate to use a Non-imputation Indemnity or Indemnity over a specific issue?

Non-imputation indemnity from parties leaving and buying into an entity is require since the title company is being asked to insure over “matters created, known, suffered or assumed by the insured” without any knowledge on the part

• f the title company as to what the parties may have known.

An affidavit and indemnity allows the policy to be issued but liability to be denied if it later is proven that the parties knew about a title defect and failed to disclosure to the title company.

Other indemnities

• An indemnity from the owner and contractor can be used

in certain kinds of mechanic’s liens with bonds to support them, and in some early start situations

• Missing corporate documents
• Heirs that may not yet have paid estate taxes

How do Indemnities tie back to the Policy?

CONDITIONS

• 3. NOTICE OF CLAIM TO BE GIVEN BY INSURED CLAIMANT.

If the Company concludes that the lien, encumbrance, adverse claim or defect is not covered by this policy, or was otherwise addressed in the closing of the transaction in connection with which this policy was issued, the Company shall specifically advise the Insured of the reasons for its determination. If the Company concludes that the lien, encumbrance, adverse claim or defect is valid, the Company shall take one of the following actions: (i) institute the necessary proceedings to clear the lien, encumbrance, adverse claim or defect from the Title as insured; (ii) indemnify the Insured as provided in this policy; (iii) upon payment of appropriate premium and charges therefore, issue to the Insured Claimant or to a subsequent owner, mortgagee or holder of the estate or interest in the Land insured by this policy, a policy of title insurance without exception for the lien, encumbrance, adverse claim or defect, said policy to be in an amount equal to the current value of the Land or, if a loan policy, the amount of the loan; (iv) indemnify another title insurance company in connection with its issuance of a policy(ies) of title insurance without exception for the lien, encumbrance, adverse claim or defect; (v) secure a release or other document discharging the lien, encumbrance, adverse claim or defect; or (vi) undertake a combination of (i) through (v) herein.

CONDITIONS

• 13. RIGHTS OF RECOVERY UPON PAYMENT OR SETTLEMENT.

(a) Whenever the Company shall have settled and paid a claim under this policy, it shall be subrogated and entitled to the rights of the Insured Claimant in the Title and all other rights and remedies in respect to the claim that the Insured Claimant has against any person or property, to the extent of the amount of any loss, costs, attorneys' fees and expenses paid by the Company. If requested by the Company, the Insured Claimant shall execute documents to evidence the transfer to the Company of these rights and remedies. The Insured Claimant shall permit the Company to sue, compromise or settle in the name of the Insured Claimant and to use the name of the Insured Claimant in any transaction or litigation involving these rights and remedies. If a payment on account of a claim does not fully cover the loss of the Insured Claimant, the Company shall defer the exercise of its right to recover until after the Insured Claimant shall have recovered its loss. (b) The Company’s right of subrogation includes the rights of the Insured to indemnities, guaranties, other policies of insurance or bonds, notwithstanding any terms or conditions contained in those instruments that address subrogation rights.

Contact Info John Rothermel

SW Regional Underwriter Senior Vice President Senior Underwriter

Stewart Title Guaranty Company San Antonio, Texas

210.590.1981 john.rothermel@stewart.com

Heidi E. Junge

Assistant Vice President Senior Underwriter

Stewart Title Guaranty Company San Antonio, Texas

210.590.1981 heidi.junge@stewart.com

To Receive CE Credit

Each individual seeking credit hours must send their own certificate request to: CEcertificate@stewart.com Please include the following information:

• Provide only this Presentation Name in the Subject Line of your e-mail – “Master

Indemnities and Other Kinds” In the body of your e-mail:

• Name of Participant (as it appears on your Escrow Officer License);
• Presentation PASSWORD given at the end of the webinar;
• License Number Only (located on left side of Escrow Officer Certificate of License –

for example: License Number: 1234567-890123) For Attorney CLE Credit also include:

• Texas State Bar Number
• Affiliation with Stewart

– Employed by Stewart Title Guaranty Company; – an affiliate; or – a Stewart agent

For more details, see the CE and CLE FAQs at:

http://www.stewart.com/en/stg/texas/education/texas-tips/ce-cle-faqs.html

49

Recordings www.stewart.com/texas Under “Texas TIPS” tab

• Posted online 10 days after live presentation
• Other current courses available

Certificates

• Processing can take up to 10 business days.
• Contact us if you haven’t received your

certificate after the allotted processing time.

CEcertificate@stewart.com

50

Join us for the next Texas TIPS webinar!

May 17, 2018

Economic Outlook

Ted Jones

For Questions/Comments Email john.rothermel@stewart.com

• r

heidi.junge@stewart.com

51