08-06: Title Plant Requirements
To: All Title Insurers, Agencies and Agents Transacting Business in the State of Missouri
From: Doug Ommen, Director
Re: Title Plant Requirements
Date: May 20, 2008
The department has received multiple inquiries and complaints from the title insurance industry regarding licensees' failure to use a title plant or "conduct a 45-year search" prior to issuing title insurance polices. These inquiries and complaints evidence a need for the director to clarify requirements related to title plant use.
Title Plant Requirements
A title plant has three key characteristics:
- An index of those records of a county imparting constructive notice to purchasers of real property;
- The index covers not less than the most recent 45 years; and
- The index is geographic as to all documents containing a legal description of affected land but by name as to other documents.
Owners of title plants meeting the statutory definition must annually register their plant with the director. Such registration includes information about the plant's title records. See 20 CSR 500-7.200, §381.031(22) and § 381.071.1., RSMo.
Requirement that a Title Plant be Used
Section 381.071.1, RSMo, prohibits the issuance of a title insurance policy unless the title insurer, agent or agency has "caused a search of title to be made from the evidence prepared from a title plant of the county where the property is located as herein defined, or if no such title plant of the county exists, or the owner of such plant refuses to furnish the title insurer, title agent, or agency desiring to insure, such title evidence at a reasonable charge and within a reasonable period of time, then such policy of title insurance shall be based upon the best title evidence available."
Should either the division of insurance market regulation examine, or the division of consumer affairs investigate, an agency's use of a title plant, examiners would require evidence that a title search was completed using a title plant, or if a search is not done using a plant, evidence of why a title plant was not used that falls within the exceptions listed in §381.071. For example, a search of the "best title evidence available" instead of a title plant search is permissible if:
- No title plant exists in the county where the property is located; or
- The owner of the title plant refuses to furnish the title insurer, title agent, or agency desiring to insure, title evidence at a reasonable charge and within a reasonable period of time.
A review of reasonable charge by the division of insurance market regulation will be based upon all current expenses of the owner of the title plant associated with conducting the requested search and any depreciation associated with establishing a title plant. A review of "reasonable time" will be based upon the totality of the circumstances including the type of transaction and type of search required. Any agency relying on this exemption based upon a title plant's prior refusal must document the refusal for review by examiners and investigators in the department.
A list of registered title plants can be obtained by calling (573) 751-3365.
Best Title Evidence Available & Sound Underwriting Practices
If an exception to the plant search requirement applies, a title search must be conducted using the "best title evidence available," in accordance with "sound underwriting practices." Section 381.071.1, RSMo.
When a title plant search exception applies and the licensee is permitted to use the "best title evidence available," rather than a title plant, the insurer, agency, and agent cannot avoid the requirement that no policy may be written until a determination of insurability has been made in accordance with sound underwriting practices. Section 381.071, RSMo, requires that a title insurance policy not be issued until the title insurer, title agent, or agency has "caused to be made a determination of insurability of title in accordance with sound underwriting practices." Examiners and investigators will look for evidence that a prudent search was performed to show all matter affecting the property and compliant with "sound underwriting practices." This includes, but is not limited to, evidence regarding easements, restrictions, and liens. Sound underwriting practices are determined by underwriting guidelines and prudent industry practices and standards.
The 45-Year "Standard"
Some have interpreted the title statutes to require that a search extending back 45 years must always be performed. Some have inferred a corollary standard that a search extending back more than 45 years is not necessary. Both propositions may occasionally be true but neither is a rule.
Department examiners and investigators will look for evidence that a prudent search was performed to show all matter affecting the property and compliant with "sound underwriting practices." This includes evidence that an adequate and appropriate search and examination have been conducted in view of the kind and character of the property and of the risk, understanding that some searches may be adequate at less than 45 years while some will require a more extensive search and examination. For example, if a 60 year search and examination are necessary to identify and show all matters affecting the title when issuing an owner's policy of title insurance, then the file must contain evidence of such a search and examination. The requirement of sound underwriting is required in all circumstances and the use of a title plant is required except in limited circumstances.