05-05: No-Action Request Addressing Hold-Open Commitments

Date:     June 15, 2005

The Department issued a no-action position letter for title companies acting within certain conduct guidelines with respect to hold-open commitments. These types of arrangements allow the purchaser to avoid paying the premium required in the purchase of a title insurance policy, while reaping most of the benefits and coverage associated with a title insurance policy.

Hold-open commitments often contain an extended expiration date, some as long as 12 to 18 months and the producer/title agent generally does not intend to actually issue a policy of title insurance. In extending the effective date, the proposed insured retains the right to request a title insurance policy at a later date even if a title claim is known. Claims arising from encumbrances upon the property would be covered even though premium is not paid until after a claim is known.

Based upon the facts provided to the Missouri Department of Insurance, the Department will not take enforcement action on title companies utilizing hold-open commitments if those commitments are issued under the following guidelines:

This no-action letter is not meant to state that all conduct falling outside the guidelines set forth in this letter will be challenged by the Department. It does describe the hold-open commitments that the Legal Section of the Department will not challenge.