What Does Title Insurance Protect
What Protections are Included in/ Excluded from Unmodified Title Insurance Policies?
A title insurance policy is a one-owner item; its coverage extends only to the insured and to those who succeed to the interest of the insured by operation of law (e.g. personal representatives, fiduciaries and heirs). A title insurance policy is NOT assignable to another purchaser. You should note, however, that policy coverage is perpetual as to the insured. So, if, ten years after you sell your property, it is found that you breached your contract with your Buyer because you conveyed defective title to the property (e.g. there was a forged deed in your chain of title), your insurer will be obligated to defend/ reimburse you as necessary – assuming, of course, that your policy provides sufficient coverage for the defect.
A. How will a standard title insurance policy protect you?
A standard title insurance policy is likely to protect against only SOME common risks that can threaten your use and enjoyment of real property. Be very careful to review the terms of your policy (or hire a title insurance attorney to do so) to ensure that you are adequately protected. But generally, your owner’s title insurance policy will require your insurer to defend your title in court and pay for actual loss up to the policy maximum under the following circumstances:
- A lien is filed against your title because a previous owner failed to pay a mortgage, deed of trust, tax, judgment, special assessment or homeowners/ condominium association fee;
- There are leases, contracts or options on your land that weren’t recorded in the public records or disclosed to you;
- You lack a right of access to and from your property;
- A deed in your chain of title is invalid because somewhere along the way, a notary public or other official improperly signed, recorded or delivered a deed; and
- A deed or other document in your chain of title is invalid as a result of forgery, fraud against the rightful owner, a signature given under force or a signature given by a person legally incompetent to sign or claiming to be someone else.
In June 2009, Attorneys’ Title Insurance Fund, Inc. reported that of the 6,105 claims made on Fund Florida policies in 2008, the vast majority concerned defective instruments, e.g. forged deeds (2,107) and superior mortgages, e.g. loss of priority of the lien of the insured mortgage (1,034).
B. What protections are NOT included in a standard title insurance policy?
Absent endorsements to the contrary (hereinafter explained), a standard
title insurance policy will NOT protect you against title defects – unrecorded or recorded, and regardless of when sustained – about which you knew or which you allowed to occur. Also, it will NOT cover problems with your title that occur after the date on which you purchase the policy. Further, your title insurance policy will NOT protect you from UNRECORDED claims against the title to your property. Your insurer is also NOT likely to protect you against loss or damage suffered by reason of:
- Violations of building and zoning ordinances and other laws and regulations related to land use, land improvements, land division and environmental protections;
- Any restrictive covenants that limit how you may use your property and/ or state how buildings are to be constructed on it; these are contained in the policy itself;
- Losses resulting from rights claimed by renters or others occupying the land;
- Condemned land, unless a condemnation notice appeared in the public record on the policy date, or the condemnation occurred before the policy date;
- Your spouse’s homestead, community property or survivorship rights to the property;
- Whatever title irregularities arise from a deceased person’s estate, a bankruptcy estate or a trust;
- Claims of others who may have certain rights if your property is near a body of water, or if it has a river or stream flowing through it; or
- Taxes for the year of the effective date of the policy, as well as subsequent taxes and assessments by taxing authorities for prior years due to change in land usage or ownership (i.e. where tax exemptions claimed by previous owners result in more taxes being assessed against your property in the future).
C. Am I protected if a prior homeowner makes a claim that the home was fraudulently foreclosed and they want their home back?
In light of all of the foreclosure fraud, this question is now more important than ever. Unfortunately, due to recently issued court rulings and other pending litigation throughout the Country the answer is not easy to come by. That doesn't mean that if you recently purchased a foreclosure that you don't have rights. Depending on the facts of your case, you may have, at the very least, a title insurance claim.
Contact an Experienced Title Insurance Lawyer
If you would like more information about this topic or are interested in filing a title insurance claim, contact Lawrence Tolchinsky to find out how he can help you. You can contact him by phone at 954-458-8655 or by e-mail to schedule an appointment to learn more about title insurance. He offers a free initial consultation.
To learn more about Lawrence Tolchinsky, click on this link: Title Insurance Attorney
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