Issue #19 | 2018
AGENTconnect A COLORADO AGENCY NEWSLETTER
AFFIDAVITS AND INDEMNITIES
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In This Issue
The customer insists on modifying your standard form of affidavit and indemnity to add knowledge qualifiers or an automatic termination clause.
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Affidavits and Indemnities
What are affidavits and why do we require them? An affidavit is a document that contains a representation of facts, given under oath, of a person known as the “affiant.” The representations made in affidavits provide vital information, generally not available in the Public Records, upon which to base our underwriting decisions. Our standard forms include indemnification provisions by which an indemnitor, who may or may not be the affiant, agrees to indemnify (protect) First American against losses arising out of any false statements in the affidavit. This provides a direct contractual mechanism to recoup loss suffered by our reliance on the affidavit.
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Knowledge qualifiers. The affiant should have personal knowledge of the facts stated in the affidavit, either because that person is knowledgeable about the day-to-day operations of the property or because he or she has consulted with someone who is. Without this knowledge, we cannot justifiably rely on the affidavit to provide coverage for off-record matters. When representations in the affidavit are limited “to the best of my knowledge”, “to my actual, current knowledge” or “ to the best of my knowledge with no duty to investigate”, it undermines the reliability of the representations and suggests that the affiant may not have the requisite knowledge to make a definitive representation. Are knowledge qualifiers acceptable? Generally, knowledge qualifiers are unacceptable. If the customer insists on knowledge qualifiers, you may agree to them only if you are confident that the representations in the affidavit are true. Consider the following in determining the reliability of the representations: (i) What is the requested knowledge qualifier? For example, in some states, “to the best of my knowledge” may be better than “to the best of my knowledge with no duty to investigate”. Perhaps the affiant would agree to limit its qualifier to “no duty to investigate with any person or source outside of the Company”or, if there is an independent property manager with requisite knowledge, “no duty to investigate with any person or source except Property Manager”? (ii) Does the affidavit state that the affiant is familiar with the condition, operation, maintenance and use of the property and records relating to these matters? If so, we may gain more confidence in the truth of the statements. (iii) Can you verify the representations in the affidavit through other means, such as a site inspection, survey, zoning report, Google search, etc. (iv) What do you know about the seller/owner? How long have they been in title? Are they trustworthy? (v) What is the use, ownership, or structure of the deal? What coverage is based on the representations in the affidavit? Continued on next page
The information contained in this document was prepared by First American Title Insurance Company (“FATICO”) for informational purposes only and does not constitute legal advice. FATICO is not a law firm and this information is not intended to be legal advice. Readers should not act upon this without seeking advice from professional advisers. First American Title Insurance Company makes no express or implied warranty respecting the information presented and assumes no responsibility for errors or omissions. First American, the eagle logo, First American Title, and firstam.com are registered trademarks or trademarks of First American Financial Corporation and/or its affiliates.
First American Title | AGENTconnect | 2018 - Issue 19
AMD: 12/2018
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