Constraints On Affirmative Insurance
There may be some constraints upon the offering of affirmative coverage. For example:
- In the majority of states, title insurance policy forms and endorsements are required by law to be filed and approved by the state insurance authorities. In some of these states, laws require filing and approval, prior to use of the forms ("prior approval"). Others require filing and deem the forms approved, unless rejected by the Insurance Commissioner within the statutory time limit. A third group of state laws simply require that the forms be filed before the company can use the forms ("file and use").
- Several states have laws and insurance department regulations that do not authorize certain special coverages (zoning, usury, mechanic's coverage during construction, etc.)
- In New Mexico and Texas, state law directs the respective state insurance commissioners to promulgate title insurance policies and endorsements; and these forms cannot be modified.
Standard Affirmative Coverages By ALTA 1987, 1990, and 1992 Title Policies
The standard affirmative coverages offered by ALTA policies are the following:
- Vesting of title other than as stated (all policies)
- Defects, liens, and encumbrances (all policies)
- Lack of right of access (all policies)
- Unmarketability of title (all policies)
- Invalidity or unenforceability of insured instrument (loan policy)
- Priority of any other lien or encumbrance over insured mortgage (loan policy)
- Priority of any statutory lien (unrecorded mechanics' lien) over insured instrument (loan policy)
- Invalidity or unenforceability of any assignment of insured instrument or failure of such assignment to vest title as stated (loan policy)
Endorsement Forms Relative To The Insurance Provisions Of The Policy
ALTA Forms Of Endorsements
There are numerous endorsements for the basic policies at this time.
Other Forms Of Title Insurance Endorsements
A variety of title risks may be insured through a form of endorsement, subject to numerous jurisdictional constraints, and Company approval. Most endorsements are the product of market demand and local practices.
Because of the risk and complexity involved, many endorsements require prior underwriter approval, including but not limited to the following:
- Automatic subordinations
- Insuring tidelands or submerged lands
- Insuring Native American lands
- Insuring a mineral estate or water rights separate and apart from the surface interest
- Insuring title to railroad property
- Creditors' rights coverage
- Synthetic leases
- Mechanic's lien issues
- Going concern
- Option endorsements insuring priority over future matters
- Endorsements of unique characters other than commonly issued or customary endorsements
The Deletion of an Exclusion or Exception does not provide Affirmative Coverage
Written authorization from the Company is required to delete or modify any exclusion from coverage in the title insurance policy by endorsement; and the Company requires written approval of the endorsement language.
In some cases and under specific conditions, certain matters shown as general or specific exceptions in Schedule B of the policies are "insured over"; that is, affirmative insurance is provided against "loss or damage," not exceeding the amount of the policy, as a result of such matters.
Additonal Reference: Stewart Bulletin SLS2007007
How To Insure Over
Insuring over exceptions and other title risks is hazardous. Extreme care should be exercised prior to assuming the additional risk and in wording the clause affording the additional coverage. Although coverage must usually be tailored to suit every particular situation, there are certain general rules and guidelines to observe:
- Language never to be used - Examples
- The Company insures against the consequences of any attack.
- The policy insures against any loss by reason of judgment shown at No. _____ above.
- The Company insures the insured against all loss or damage as a result of said violation.
- The Company insures against forced removal or attempted forced removal.
- This policy insures against loss or damage arising out of an enforcement or attempted enforcement of the rights, if any.
- Language to be used - Examples
- When insuring over an actual lien or encumbrance:
"The Company hereby insures the insured against loss sustained or incurred by the Insured not exceeding the amount of this policy, by reason of the enforcement of the lien excepted at No. _____ of Schedule B so as to secure full or partial satisfaction thereof out of the land described in Schedule A as a lien encumbering or having priority over the estate or mortgage insured by this policy, as well as such costs, attorneys' fees and expenses in defense against such encumbrance as provided in the Conditions and Stipulation of this policy."
- In special circumstances, the following may be used:
"The Company insures against loss or damage by reason of the enforcement or attempted enforcement of the lien excepted at No. _____ of Schedule B."
- When insuring over an encroachment:
"The Company hereby insures against loss or damage which the insured shall sustain by reason of the entry of any court order or judgment which constitutes a final determination and denies the right to maintain the existing improvements on the land because of the encroachment or encroachments thereof specifically set forth at exception number(s) _____ in Schedule B onto adjoining land."
See Extended Coverage (5.32).
- When insuring over an actual lien or encumbrance: