TITLE INSURANCE BASICS:
What Every Massachusetts Lawyer Should Know.
By Ward P. Graham, Esq., New England Region Counsel
Stewart Title Guaranty Company, Boston, MA
TABLE OF CONTENTS
I. WHAT IS TITLE INSURANCE?...... 1
A. Origin and Basic Characteristics...... 1
B. Title Insurance as a Contract of Indemnity...... 2
C. Title Insurance Compared to Other Forms of Insurance...... 3
1. Retrospective Character and Risk Elimination vs.
Risk Assumption...... 3
2. Evolution from Risk Elimination to Risk Assumption...... 5
3. Premium Structure and Rates...... 5
4. Duration of a Title Insurance Policy...... 6
5. Policy Interpretation...... 9
6. Insurer’s Duty to Defend...... 10
a. Duty to Defend Generally...... 10
b. Duty to Defend Under a Title Insurance Policy...... 11
II. BASIC PROVISIONS OF A TITLE INSURANCE POLICY...... 14
A. Standard Forms of Policies in Use Over the Last Decade...... 14
B. Schedule A – Who and What Are Being Insured? ...... 15
C. Schedule B – What Is Not Being Insured, Generally or Specifically? .16
D. Standard Insuring Provisions...... 18
E. Exclusions From Coverage...... 19
F. Conditions and Stipulations...... 24
G. Selected Issues Regarding the Basic Policy Provisions and
Schedules...... 26
1. Insuring Provisions Raising the Most Issues...... 26
a. Insuring Provision 1: “Title to the estate or interest described
in Schedule A being vested other than as stated therein.” ..26
b. Insuring Provision 2: “Any defect in or lien or encumbrance
on the title.” ...... 27
c. Insuring Provision 3: “Unmarketability of the title.” .....30
d. Insuring Provision 4: “Lack of a right of access to and from
the land.” ...... 33
III. RISK ASSUMPTION: AFFIRMATIVE INSURANCE (A/K/A
AFFIRMATIVE COVERAGES) AND ENDORSEMENTS ...... 34
A. Affirmative Insurance Generally...... 34
B. Affirmative Insurance in Endorsements...... 34
C. Affirmative Insurance -Case Law Perspective...... 36
1. Falmouth National Bank v. Ticor Title Ins. Co...... 36
2. Golden Security Thrift & Loan Assoc. v. First American
Title Ins. Co ...... 37
3. First National Bank of Northbrook v. Stewart Title Guaranty Co. .38
4. An Unreported Arbitration Case...... 39
5. Lessons to be Learned...... 40
D. Some Affirmative Coverage Samples...... 40
1. List of Some Common Affirmative Coverage Examples...... 40
2. Limited Marketability of Title Coverage...... 41
3. Plot Plan /Encroachment /Zoning Setback Problems – Forced
Removal Coverage ...... 41
4. Characterization of a Way...... 42
E. Indemnity Agreements...... 43
IV. RISK ASSUMPTION IN THE 21ST CENTURY: NEW EXPANDED COVERAGE POLICIES AND NEW EXPANDED COVERAGE LEASEHOLD ENDORSMENTS. 44
A. New Expanded Coverage Policy Forms. ………………………,,,,,….…44
1. Introduction. ………………………………….……………….….…45
2. Main Features of the ALTA Homeowners [Extended Coverage]
Policy...... 46
a. Greater Specificity as to the Matters Covered
(Covered Risks) and Terms and Conditions of
Policy Written in Plain Language...... 46
b. New Coverages for Post-Policy Matters...... 46
c. New Coverages Even If Excepted in Schedule B...... 47
d. New and Expanded Coverage Concepts...... 48
e. Deductible Amounts and Limits of Liability...... 51
f. Improved and Omitted Exclusions from Coverage...... 51
g. Claims...... 52
h. Schedule B Exceptions...... 52
i. Miscellaneous Items of Interest...... 53
APPENDIX OF EXHIBITS...... 55