The Statewide Title Newsletter and Legal Memorandum

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Issue  18  Article  40
Published:  1/1/1997

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"ICS Letters"
Ed Urban, Vice President and Corporate Counsel

"Insured closing protection" or "insured closing service" letters are now clearly permitted by North Carolina’s insurance laws. See G.S. 58-26-1(d). Routinely, the title insurer will issue such a letter to a proposed insured lender (or other proposed insured) covering the protected party for certain specified acts or omissions of the approved attorney or group of approved attorneys named or referred to in the letter, subject to the provisions of the letter. The two major problems protected against are failure of the attorney to follow closing instructions and attorney defalcation. This is issued at no extra charge. In North Carolina, this letter is actually additional protection for the named protected party or parties, since, in North Carolina, the approved attorney might be the attorney agent of the insured, but is probably not the agent of the insurer. See G.S. 58-26-1.

It is important for all parties to see to it that clear, written, closing instructions are given to the approved attorney if the approved attorney is playing any role in the closing.

The ALTA form letter is frequently used. This letter can be amended to waive requirement for a binder or commitment. A master letter covering all of the title insurer’s approved attorneys can be issued to the lender. Subsequently, the lender can request a short confirmation letter from the title insurer confirming that an attorney or a law firm is covered by the previously issued master letter by virtue of being an approved attorney or an approved firm.

It is important to follow closing instructions since an "ICS" letter can create liability where policy liability might not exist.

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