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AgentXtra Net

AgentXtra Net

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Published by Mary Cochrane

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Published by: Mary Cochrane on Dec 08, 2012
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07/12/2014

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Title Insurance Policies
 
 AUTHORS: Gretchen L. Valentine and William H. Reetz
DEFINITION
 A title Insurance policy insures owners or others having an interest in real propertyagainst loss by encumbrance, defective title, adverse claim to title, or servicesconnected to the issuance of title insurance.
RELATED TOPICS
SUMMARY
The title policy gives notice to the insured of the condition of title on the date of thepolicy. A title insurance policy is a contract of indemnity, not a guarantee that title to theproperty insured is free of defects or encumbrances. A title insurance policy has been described as a formula:
insuring provisions, minus exclusions from coverage, minus exceptions to coverage, subject to conditions and stipulations, plus and/or minus endorsements, equals title insurance coverage 
. Thebasic form of the ALTA title insurance policies have remained consistent since theintroduction of the American Land Title Association (ALTA) policies in 1970.
DETAILED EXPLANATION
AMERICAN LAND TITLE ASSOCIATION POLICIES
The American Land Title Association (ALTA) is a national association consisting of titleinsurers, agents, and affiliated members. The ALTA maintains a Title Insurance FormsCommittee, which meets periodically to consider proposed changes to ALTA policy andendorsement forms. In recent years, the ALTA Forms Committee has made thefollowing significant changes to the original 1970 ALTA policies:
 
1970 ALTA policies (rev. 10-17-70)The 1970 ALTA policy forms were used primarily between the years 1970 and 1987 toinsure owners and lenders. As later ALTA forms emerged, many commercial customerscontinued to require issuance of the 1970 ALTA forms, in the belief that coverage mightexist under the 1970 policy with regard to environmental protection. Exclusions 1 and 2of the 1970 ALTA Loan Policy, for example, exclude from coverage loss arising from:
1970 ALTA Policies (rev. 10-17-70)
 
The following matters are expressly excluded from the coverage of this policy:
 
1.
 
 Any law, ordinance or governmental regulations (including but not limited tobuilding and zoning ordinances) restricting or regulating or prohibiting theoccupancy, use or enjoyment of the land, or regulating the character,dimensions or location of any improvement now or hereafter erected on theland, or prohibiting a separation in ownership or a reduction in thedimensions or area of the land, or the effect of any violation of any suchlaw, ordinance or governmental regulation.
 
2.
 
Rights of eminent domain or governmental rights of police power unlessnotice of the exercise of such rights appears in the public records at Date of Policy.
 
The exclusionary language is rather broad when you consider that
any 
law, ordinanceor governmental regulations relating to, among other things, occupancy, use, enjoymentor governmental rights of police power are excluded. Although the 1970 ALTA policyforms do not specifically exclude losses due to governmental regulation of "environmental protection", the title industry has consistently maintained that the 1970 ALTA policies were never intended to provide coverage for environmental protectionmatters, unless a lien was recorded in the public records on the date of policy and notexcepted from coverage. A number of cases support this position.
See, e.g.
 
Chicago Title Insurance Co. v. Kumar,
24 Mass. App. Ct. 53, 506 N.E. 2nd 154 (1987). ALTA leasehold and leasehold loan policies (1975)1975 saw the introduction of the leasehold policy forms that introduced some forms of liability for consequential damages into title insurance policies. The appeal of thesepolicies has been disappointing. They become less and less popular as developmentsare made in the area of leasing as a financing tool for real estate because their measureof damages is predicated on the loss of a simple operating lease.1970 ALTA policies (rev. 10-17-70 & 10-17-84)
 
Often referred to as the 1984 ALTA policies, this revision to the 1970 ALTA policyforms, and the 1975 ALTA leasehold policies was a stopgap to fix title industry concernsabout environmental losses and losses caused by invalid subdivisions of land. Thechange affected only Exclusions 1 & 2, so they are reproduced here for a comparison tothe same exclusions as they appeared in the 1970 policies shown above.The most significant changes are the addition of exclusions for environmental protectionliens in Exclusion 1b and for laws, ordinances and regulations prohibiting a "change inthe dimensions or area of the land, or any parcel of which the land is or was a part" inExclusion 1c.To balance these additions to the Exclusion, Exclusion 1d tempers all of exclusion 1 bymaking the title insurer responsible for excepting any notice filed in the public records of a violation of the matters described in the exclusion.
1970 ALTA Policies (rev. 10-17-70 & 10-17-84)
 
The following matters are expressly excluded from the coverage of this policy:
 
1.
 
a.
 
Governmental police power.
 
b.
 
 Any law, ordinance or governmental regulation relating toenvironmental protection.
 
c.
 
 Any law, ordinance or governmental regulation (including but notlimited to building and zoning ordinances) restricting or regulating or prohibiting the occupancy, use or enjoyment of the land, or regulating the character, dimensions or location of any improvementnow or hereafter erected on the land, or prohibiting a separation inownership or a change in the dimensions or area of the land, or anyparcel of which the land is or was a part.
 
d.
 
The effect of any violation of the matters excluded under (a.), (b.) or (c.) above, unless notice of a defect, lien or encumbrance resultingfrom a violation has been recorded at Date of Policy in those recordsin which under state statutes deeds, mortgages, lis pendens,liens or  other title encumbrances must be recorded in order to impartconstructive notice to purchasers of the land for value and withoutknowledge; provided, however, that without limitation, such recordsshall not be construed to include records in any of the offices of federal, state or local environmental protection, zoning, building,health or public safety authorities.
 
2.
 
Rights of eminent domain unless notice of the exercise of such rightsappears in the public records at Date of Policy.
 

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