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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 obtain the password (provided at the end of the presentation) follow the instructions as given
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ATTORNEY INFORMATION
Because of opinions expressed by the Texas Department
of 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.
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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
obligated 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
of 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
owelty 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
or 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
of 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
only 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
of 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
obligation 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
of 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
or 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
other 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.
• 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
of 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
otherwise 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
of 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
of 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
Heidi E. Junge
Assistant Vice President
Senior Underwriter
Stewart Title Guaranty Company
San Antonio, Texas
210.590.1981
To Receive CE Credit Each individual seeking credit hours must send their own certificate request to:
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
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• Posted online 10 days after live presentation
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• Processing can take up to 10 business days.
• Contact us if you haven’t received your
certificate after the allotted processing time.
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Join us for the next Texas TIPS webinar!
May 17, 2018
Economic Outlook
Ted Jones
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