Mutual Indemnification Agreements

What is a "Treaty"

A handful of states have Mutual Indemnification Agreement (sometimes referred to as a “Treaty”), to which WFG National Title Insurance Co. is a party. These are a standing offer of indemnification given by each insurer who is party to the Treaty to every other party to the agreement. Each offers to protect the other party from loss or damage resulting from certain, very specific, usually narrow, types of title defects which may have been missed or not cured at the time the prior insurer insured a transaction. Coverage under a Treaty is never available if the prior insurer took a proper exception for the matter in their policy.

What Can a Treaty Resolve

Reliance on a Treaty is sometimes a solution to allow a current transaction to close without curing an underlying title defect. It does not “Fix” or “Cure” the underlying problem, so, depending on the issue, this “solution” may not be beneficial or acceptable to your customer, nor does reliance on a treaty necessarily protect a WFG agent from possible claims by their customer.

Because this is an extension of the liability of the prior insurer, the categories covered are generally narrow, including things like mortgages not satisfied of record, or not satisfied by the record holder of the mortgage (HELOCS are often excluded from the Treaty); inability to confirm authority of corporate officers and those operating under powers of attorney from record sources; whether all formalities were followed and due process given in foreclosures or other title litigation; lack of witnesses and acknowledgement defects (in states where these are cured by statute with the passage of time) and other title defects.

What to Check when Relying on a Treaty

In issuing a WFG policy, WFG agents (and in the West, our direct operations) are authorized to rely on any applicable Treaties without the need for specific approval by the Underwriting Department, upon confirming:

• Both WFG and the insurer that issued the prior policy are parties to the Treaty. (not all underwriters are parties to every treaty)
• The property to be insured is within the state covered by the Treaty.
• You have possession of (and keep in your files) a copy of the title policy insuring the current owner in some prior transaction, confirm that policy was issued after the defect in question was placed of record, and that the prior policy took no exception for that defect.
• The agent has confirmed that the defect in question is covered by the Treaty, does not exceed any dollar limits and that there is strict compliance with all of the Treaty’s requirements, conditions, and limitations.
• So that there is no question later about whether the defect was known and disclosed to the customer, and so WFG is on notice of potential recoveries under a Treaty, language similar to the following should be included in any WFG commitment and policy issued in reliance on the Treaty:

Note: The title search revealed [describe the defect including any recording information]. No exception to coverage is being taken for this matter based on the indemnities provided in [________________Mutual Indemnification Agreement] and Title policy #XXXXX issued by [Company].

• A copy of the prior company’s policy should be attached to the WFG policy when the WFG policies are submitted.

Caution

Treaties are highly technical, with lots of provisos and conditions. If you read it wrong, or don’t fully understand it – you as the agent may be taking on significant liability. In relying on a Treaty, you are insuring over a known title defect, and if the treaty doesn’t apply, you may be doing so without any protection from the prior insurer (and perhaps even releasing the prior insurer from liability); so if you have questions about the applicability of a treaty to a specific transaction, please contact the WFG underwriter in the state for your property.

The following Title Insurance Companies are now defunct and their policies may no longer be relied upon under any MIA:

• Guaranty Title and Trust Company
• Law Title Insurance Company
• National Attorneys’ Title Assurance Fund, Inc.
• New Jersey Title Insurance Company (signatory on NY and NJ MIA)
• Southern Title Insurance Company (signatory on GA MIA)
• Washington Title Insurance Company (signatory on NY MIA)

States with Treaties

WFG is currently party to Treaties in

• Alabama
  • Note: WFG joined the Alabama MIA as Atlantic Title Insurance Company in 2002, and rejoined as WFG in 2020
• Arkansas
• Florida
  • Florida pre-2016 MIA
• Georgia
• Indiana
• Illinois
  • Change of Notification Address for First American
• Maryland
• Michigan
• Mississippi
• New Jersey
• New York
• South Carolina
• Tennessee MIA
• Texas - Multiple Agreements
• Virginia MIA

WFG has elected not to join the Mutual Indemnification Agreement in North Carolina.

PACA

While it is not clear that every court would impose a lien on a piece of real property in a PACA claim, the title insurance company has indicated that PACA affidavit and indemnity agreements will be required going forward for the sale of any property owned or leased by a potential PACA dealers. Under the broad language of PACA, many tenants are or could be considered “dealers” under the terms of PACA. Common retail entities subject to PACA trust duties include grocery stores, “big box” stores, and any retailer purchasing produce in “wholesale or jobbing quantities.”6 It is possible that other operations, including table-service and fast-food restaurants, catering companies, mini-marts, convenience stores or even the local coffee or donut shop may be subject to PACA trust duties, if they are purchasing produce in “wholesale or jobbing quantities.”

I don’t think in this instance it hurts to get the following affidavit executed. You can have your examiner string together a B-I exception along this line:

The Company should be provided an affidavit and indemnity that it is not the subject of, nor does it anticipate to have imposed, any lien under the Perishable Agricultural Commodities Act (“PACA”) and the Packers and Stockyards Act (“PASA”) as those regulations are set forth in 7 U.S.C. Section 499a, et. seq. and 7 U.S.C. Section 181 et. seq..