Risks Covered By Owner’s Policy of Title Insurance

By

Michael Roussis

Michael Roussis

The 2021 ALTA Owner’s Policy of Title Insurance sets forth a list of risks insured under the terms of such policy, subject to the exclusions, exceptions and conditions set forth in such policy. A common misconception is that title insurance only provides coverage in the event that a grantor lacks a valid claim of title to the property being conveyed. In reality, as indicated below, title insurance provides coverage against an extensive universe of matters.

List of Covered Risks

More specifically, the “covered risks” set forth in the 2021 ALTA Owner’s Policy of Title Insurance are summarized below, subject the exclusions, exceptions and conditions set forth in the policy:

1. The estate or interest in the insured property (the “Title”) being vested other than as stated in Schedule A of the policy;
2. Any defect in or lien or encumbrance on the Title, including, but not limited to, loss from:
   1. a defect in the Title caused by:
      1. forgery, fraud, undue influence, duress, incompetency, incapacity, or impersonation;
      2. the failure of a person or Entity (defined as a corporation, partnership, trust, limited liability company, or other entity authorized by law to own title to real property in the State where the insured property is located) to have authorized a transfer or conveyance;
      3. a document affecting the Title not properly authorized, created, executed, witnessed, sealed, acknowledged, notarized (including by remote online notarization), or delivered;
      4. a failure to perform those acts necessary to create a document by electronic means authorized by law;
      5. a document executed under a falsified, expired, or otherwise invalid power of attorney;
      6. a document not properly filed, recorded, or indexed in the public records, including the failure to have performed those acts by electronic means authorized by law;
      7. a defective judicial or administrative proceeding; or
      8. the repudiation of an electronic signature by a person that executed a document because the electronic signature on the document was not valid under applicable electronic transactions law.
   2. the lien of real estate taxes or assessments imposed on the Title by a governmental authority due or payable, but unpaid.
   3. the effect on the Title of an encumbrance, violation, variation, adverse circumstance, boundary line overlap, or encroachment (including an encroachment of an improvement across the boundary lines of the insured land described in Schedule A of the policy), but only if the encumbrance, violation, variation, adverse circumstance, boundary line overlap, or encroachment would have been disclosed by an accurate and complete land title survey of the insured land described in Schedule A of the policy.
3. Unmarketable Title (defined as the Title affected by an alleged or apparent matter that would permit a prospective purchaser or lessee of the Title or a lender on the Title to be released from the obligation to purchase, lease, or lend if there is a contractual condition requiring the delivery of marketable title).
4. No right of access to and from the insured land described in Schedule A of the policy.
5. A violation or enforcement of a law, ordinance, permit, or governmental regulation (including those relating to building and zoning), but only to the extent of the violation or enforcement described by the enforcing governmental authority in an Enforcement Notice (as defined in the policy) that identifies a restriction, regulation, or prohibition relating to:
   1. the occupancy, use, or enjoyment of the insured land described in Schedule A of the policy;
   2. the character, dimensions, or location of an improvement on the insured land described in Schedule A of the policy;
   3. the subdivision of the insured land described in Schedule A of the policy; or
   4. environmental remediation or protection on the insured land described in Schedule A of the policy.
6. An enforcement of a governmental forfeiture, police, regulatory, or national security power, but only to the extent of the enforcement described by the enforcing governmental authority in an Enforcement Notice (as defined in the policy).
7. An exercise of the power of eminent domain, but only to the extent:
   1. of the exercise described in an Enforcement Notice (as defined in the policy); or
   2. the taking occurred and is binding on a purchaser for value without Knowledge (defined as actual or actual notice, but not constructive notice imparted by the public records).
8. An enforcement of a PACA-PSA Trust (as defined in the policy), but only to the extent of the enforcement described in an Enforcement Notice (as defined in the policy).
9. The Title being vested other than as stated in Schedule A of the policy, the Title being defective, or the effect of a court order providing an alternative remedy:
   1. resulting from the avoidance, in whole or in part, of any transfer of all or any part of the Title to the Land or any interest in the Land occurring prior to the transaction vesting the Title because that prior transfer constituted a:
      1. fraudulent conveyance, fraudulent transfer, or preferential transfer under federal bankruptcy, state insolvency, or similar state or federal creditors’ rights law; or
      2. voidable transfer under the Uniform Voidable Transactions Act; or
   2. because the instrument vesting the Title constitutes a preferential transfer under federal bankruptcy, state insolvency, or similar state or federal creditors’ rights law by reason of the failure:
   3. to timely record the instrument vesting the Title in the public records after execution and delivery of the instrument to the named insured; or
   4. of the recording of the instrument vesting the Title in the public records to impart notice of its existence to a purchaser for value or to a judgment or lien creditor.
10. Any defect in or lien or encumbrance on the Title or other matter included in covered risks 1 through 9 set forth above that has been created or attached or has been filed or recorded in the public records subsequent to the date of the policy and prior to the recording of the deed or other instrument vesting the Title in the public records.

Disclaimer

The description of “covered risks” identified above are intended to serve as a summary. For the exact list of “covered risks” and defined terms associated therewith, please be sure to consult the form of ALTA Owner’s Policy of Title Insurance which may be in effect from time to time or any policy issued to you, as applicable.