Underwriters and their agents often face the prospect of insuring minor defects on the eve of closing and the notion of attempting to obtain a “letter of indemnity” from the prior insurer may be daunting. Requests for a letter of indemnity must first be submitted to the prior insurer, usually with a copy of the prior insurer’s policy, a current commitment showing the matter as a requirement or exception, and other pertinent documents. The prior insurer would then have to locate its underwriting file (often from storage) to determine if the purported error was previously addressed in some fashion. If it was not, then the prior insurer may have to submit the matter to its claims department for a determination that a letter of indemnity was appropriate. This process is inefficient and frequently fails to timely address the issue on behalf of the consumer.
In 2007, many of the major underwriters in Mississippi finalized an agreement to alter and improve this process with regard to certain matters of title. The purpose of the Mississippi Mutual Indemnification Agreement (the “MIA”) is to expedite the clearance of certain types of potential defects and limit the need to obtain individual letters of indemnity. As of the date of this article, the following underwriters have joined in the execution of the MIA as “participating underwriters”:
|Participating Underwriter||Effective Date|
|Alliant National Title Insurance Company||December 1, 2017|
|AmTrust Title Insurance Company||February 21, 2018|
|Chicago Title Insurance Company||May 17, 2007|
|Commonwealth Land Title Insurance Company||May 23, 2007|
|Fidelity National Title Insurance Company||October 15, 2007|
|First American Title Insurance Company||May 17, 2007|
|Lawyers Title Insurance Company||May 23, 2007|
|Mississippi Valley Title Insurance Company||November 8, 2011|
|Old Republic National Title Insurance Company||November 8, 2011|
|Security Union Title Insurance Company||May 17, 2007|
|Stewart Title Guaranty Company||November 29, 2007|
|The Security Title Guarantee Corporation of Baltimore||December 4, 2007|
|Ticor Title Insurance Company||October 23, 2007|
|Transnation Title Insurance Company||May 23, 2007|
|Westcor Land Title Insurance Company||September 19, 2012|
Under the MIA, the procedure that the title company or agent must follow is not complicated. If an exception to title is a covered “potential defect” as defined in the MIA, and the general conditions of coverage are satisfied, then, subject to certain limitations, the prior title insurer will be deemed to indemnify the new insurer without the need of further action by either company.
Potential defects covered by the Mutual Indemnity Agreement include five (5) specific title matters that are, unfortunately, routine in Mississippi. These potential defects generally include the following:
(a) Conveyances of a possible homestead without joinder of a spouse if the grantor was married;
(b) Liens arising from money judgments (but not a certificate of delinquency for child support) and federal or state tax liens up to a face amount of $250,000.00;
(c) Unsatisfied mortgages or deeds of trust securing on their face no more than $250,000.00 so long as it does not secure revolving credit or equity lines of credit;
(d) Lack of guardians or attorneys ad litem to represent an absent defendant or deficiencies in or absence of, a diligent search affidavit (when required by law) in any judicial proceeding (“The Case”) which results in a final, unappealable judgment affecting the title to the property;
(e) Lack of or insufficient notice of record of the authority of an attorney-in-fact or trustee to make a prior conveyance to the seller or mortgagor in the current transaction so long as the indemnitor’s policy insuring the title without the exception is a least one-year-old.
In order for the obligation of the indemnifying title insurer (Indemnitor) to arise, the following general conditions of coverage must be satisfied:
(1) The indemnitor’s policy must be a least one year old and contain no exception for the subject title objection listed above;
(2) There must be no record notice of any proceeding to enforce the judgment, tax lien, or mortgage;
(3) There must be no record notice of any proceeding to attack or set aside the title resulting from the Case or the conveyance referenced in items (d) or (e) above;
(4) The amount of the automatic indemnity is limited to the Face Amount of the indemnitor’s policy or $250,000.00 whichever is LESS;
(5) This indemnity is limited to policies issued on Mississippi properties only; and
(6) An indemnitor is the underwriter who has already issued its policy without exception to the covered matter. An indemnitee is an underwriter whose policy is issued in reliance upon the automatic indemnitees given in the Agreement.
It is important to note that a policy issuing agent should obtain permission from the underwriter of the new policy (the proposed indemnitee) to rely upon the terms and provisions of the Agreement before insuring over one or more of the defects referred to in items (a) through (e) above. In addition, nothing in the MIA prevents a participating underwriter from issuing a separate letter of indemnity or refusing to indemnify in cases not covered under the MIA or requires an underwriter to issue a letter of indemnity, if at all, within the time set for the closing.
Members may obtain a copy of the MIA by visiting the LTAMS Library.