A hold harmless letter is an indemnity agreement between two title insurance underwriters wherein, one underwriter agrees to indemnify the other for any claim that may arise out of a particular title defect on a particular piece of property. Usually an underwriter will agree to provide a hold harmless letter for certain classes of defects where the underwriter has insured the property in the past without exception for the defect.

You should request a hold harmless letter whenever the search reveals a defect in title that arose during the time period covered by the prior policy. Keep in mind that many hold harmless departments at other title companies have a minimum turnaround time of four business days and sometimes it takes substantially longer. In addition, some title companies will not process a hold harmless request unless the request is accompanied by the policy and signed HUD.     

From a claims perspective, the hold harmless letter allows the current underwriter to tender any claim received to the previous underwriter. Without a hold harmless letter there may be ways to trigger the previous underwriter’s coverage, but it is not as direct.  It usually requires the current insurer to bring a breach of warranty action against the seller. The seller then tenders that as a claim to the previous underwriter.  

What does the existence of a hold harmless letter mean for the insured who has a claim?  It should not mean anything for the insured. Even if the current insurer has a hold harmless letter from the previous insurer, the current insurer is responsible to the insured. Any indemnification issues are between the current insurer and the prior insurer.

If you have any questions about hold harmless letters, contact the ATG Hold Harmless Department, holdharm@atgf.com, 800.252.0402 or the ATG Underwriting Department, legal@atgf.com, 217.403.0020, or 312.752.1990.