What is the relationship between Stewart Title Guaranty Company ("Stewart") and its Policy Issuing Agent?
Title agents are authorized, through agency agreements, to issue policies for one or more title insurance underwriters. This expressed authorization does NOT extend to escrow functions such as closing and disbursements. Agents act independently from Stewart in these areas. They will proceed separately as the closing agent for the lender, buyer and/or seller, pursuant to their individual instructions, in connection with the closing of the transaction.
What is a Closing Protection Letter?
Many lenders routinely request closing protection letters. A closing protection letter is a document issued by Stewart and other underwriters that sets forth its responsibilities for negligence, fraud and errors in closings performed by its agents and approved attorneys. It indemnifies the covered party against actual loss or damage arising from a breach of certain fiduciary duties owed by the closing agent to the parties to the transaction.
If a problem arises out of the closing, through error or fraud, and no closing protection letter exists, the parties would normally be able to look only to the closing agent for recovery.
What are the benefits of a Closing Protection Letter?
Above, the policy-issuing agent is NOT an agent of Stewart for escrow, closing and disbursement of funds. This means that without this letter, Stewart may not be held liable for fraud or defalcation by the title insurance agent while performing escrow functions.
When Stewart issues a Closing Protection Letter, it is affirmatively taking responsibility for certain problems that may arise within the escrow process when the closing is performed by one of its agents. Stewart, therefore, agrees to reimburse for actual loss caused by these covered events when they arise in connection with the closing.
How is Ohio different from other states?
Pursuant to O.R.C. §3953.32, all title insurance agents are required to offer closing protection to the lender, buyer/borrower, seller and any other applicant for title insurance when title insurance is to be issued during the real estate closing. Closing Protection Coverage (CPC) must be explained and offered to all covered parties (which means if you have an interest in the real estate or if you are a lender secured by a mortgage) on a form mandated by the Ohio Department of Insurance. If you agree to purchase CPC, it requires us, as your title insurance underwriter, to reimburse you for any actual loss, if any, suffered by you during the closing, if that loss arises out of certain events.
What is the process?
As described above, every title insurance company or title insurance agent is required to offer CPC to all parties to the transaction. In doing so, two separate forms need to be explained and presented. The first is essentially the explanation of closing protection coverage, what it entails and establishes the covered events. The second is a form entitled “Notice of Availability and Offer of Closing Protection Coverage”. This form states that you are notifying your client about the existence of closing protection coverage and are now offering it to them. This form must be signed to acknowledge receipt of the offer. The last page must also be signed by the client to accept or deny the offer. The executed “Notice of Availability and Offer of Closing Protection Coverage” must be maintained in the closing file of the title insurance company or agent for ten years from the date of the real estate closing.
What are the covered events?
Subject to the various terms and conditions, CPC provides protection against loss by reason of certain acts by the issuing title office that affect the status of title. These acts include theft, misappropriation, and/or fraud in connection with the handling of funds and documents, as well as the collection and payment of funds. It also protects against loss due to the agent's failure to follow written closing instructions and failure to obtain certain required documents to the extent that such failure affects the status of title to the covered party's interest in the land.
What are the rates for Closing Protection Coverage?
The rates vary but detailed information is available for your review.