Chapter 9: Title Insurance Claims and Coverage
Filing a Title Insurance Claim
Filing a title insurance claim involves a series of steps to address a covered title issue. Here is a general outline of the process:
Identify the Issue: If you believe there is a covered title defect or claim, gather all relevant documentation related to the issue. This may include the title insurance policy, title search reports, closing documents, and any other supporting evidence.
Contact the Title Insurance Company: Reach out to your title insurance company as soon as possible to initiate the claim process. Provide them with a detailed explanation of the issue and the supporting documentation you have gathered.
Submit the Claim: Follow the instructions provided by the title insurance company to formally submit the claim. This usually involves completing a claim form and providing all necessary supporting documents. Be sure to provide accurate and complete information to expedite the claim process.
Cooperate with the Investigation: The title insurance company will conduct an investigation to assess the validity and coverage of the claim. They may request additional information or documentation from you or other parties involved in the transaction. Cooperate fully and promptly with their requests to facilitate the investigation.
Legal Representation: Depending on the complexity of the claim, you may choose to seek legal representation to navigate the claim process. An attorney experienced in title insurance claims can provide guidance and advocate on your behalf.
Resolution and Compensation: Once the investigation is complete and the title insurance company determines that the claim is valid and covered under the policy, they will work towards resolving the issue. This may involve various actions, such as paying for legal fees, clearing title defects, or compensating for financial losses suffered due to the covered defect.
Title Insurance Company’s Obligations: The title insurance company has an obligation to defend your title and, if necessary, provide financial compensation for covered losses as specified in the policy. The specific terms and conditions of coverage will vary based on the policy and the nature of the claim.
It’s important to review the terms and conditions of your title insurance policy to understand the coverage, limitations, and procedures for filing a claim. Consulting with the title insurance company, a title insurance professional, or a real estate attorney can provide further guidance and support throughout the claim process.
Coverage for Title Defects and Losses
Title insurance provides coverage for various types of title defects and losses that may arise during a real estate transaction. Here are some common examples of what is typically covered:
Undisclosed Liens: If there are any liens or encumbrances on the property that were not disclosed during the title search or closing, and they affect the validity or priority of the insured title, the title insurance policy will cover the loss.
Forgery and Fraud: If there is a case of forgery or fraud that affects the validity of the title documents or the transfer of ownership, the title insurance policy provides coverage. This includes situations where a forged signature is discovered or fraudulent documents were used in the transaction.
Mistakes in Public Records: Title insurance covers losses caused by errors or omissions in public records, such as mistakes in the recording or indexing of documents. If these errors result in a defect in the title or affect the enforceability of the insured title, the policy provides coverage.
Invalid or Defective Title: If the insured title is found to be invalid or defective, meaning there are legal issues that prevent the insured from having clear ownership rights, the title insurance policy will cover the loss. This could include situations where the property was not properly conveyed or transferred in accordance with legal requirements.
Boundary and Survey Issues: Title insurance may provide coverage for losses resulting from boundary disputes or survey-related issues. If there are conflicts or discrepancies in the property boundaries that arise after the purchase, the policy may cover the costs associated with resolving these issues.
Incorrect Legal Descriptions: If there are errors in the legal description of the property that affect the insured title, the title insurance policy can provide coverage for resulting losses.
It’s important to note that the specific coverage, exclusions, and limitations will vary depending on the terms and conditions of the title insurance policy. It’s advisable to carefully review the policy and consult with a title insurance professional or a real estate attorney to understand the extent of coverage provided in your specific policy.
Additionally, it’s worth noting that title insurance typically covers losses up to the policy’s coverage amount, which is usually the purchase price or the outstanding mortgage amount, depending on the type of policy (owner’s or lender’s).
Exceptions and Exclusions in Title Insurance Policies
Title insurance policies often include exceptions and exclusions that outline certain circumstances or risks that are not covered by the policy. Here are some common exceptions and exclusions in title insurance policies:
Known Encumbrances: Title insurance policies typically exclude known encumbrances or defects that are disclosed to the policyholder before the policy is issued. This means that if you were aware of a specific issue before obtaining the policy, it may not be covered.
Environmental Hazards: Many title insurance policies exclude coverage for environmental hazards or contamination on the property. This can include issues such as pollution, hazardous waste, or toxic substances.
Zoning and Building Code Violations: Title insurance policies may exclude coverage for violations of zoning regulations or building codes. If there are unpermitted structures or non-compliance with local regulations, it may not be covered by the policy.
Easements Not Shown in Public Records: Title insurance policies often exclude coverage for easements that are not recorded or shown in public records. If there are unrecorded easements or rights of way that affect the property, they may not be covered.
Mineral Rights: Some title insurance policies exclude coverage for mineral rights, including oil, gas, or mineral interests. If there are disputes or claims related to mineral rights, they may not be covered by the policy.
Defects Not Disclosed in Public Records: Title insurance policies typically exclude defects that are not recorded or discoverable through a search of public records. This means that hidden or undisclosed defects may not be covered.
Matters Not Listed in Schedule B: The coverage of a title insurance policy is often limited to matters listed in Schedule B of the policy. If a specific issue or defect is not listed, it may not be covered.
It’s important to carefully review the exceptions and exclusions in your title insurance policy to understand the specific limitations and coverage provided. Consulting with a title insurance professional or a real estate attorney can help clarify any questions or concerns regarding the exceptions and exclusions in your policy