Affirmative Title Insurance
Also known as affirmative coverage. A title insurance company can provide additional protection for a title insurance policy holder by insuring over a specific exception listed in a title insurance policy ( www.practicallaw.com/9-508-5805) .
Affirmative title insurance is distinguishable from title insurance endorsements ( www.practicallaw.com/0-508-5923) . Title insurance endorsements provide standard protections that have been approved by state regulatory agencies governing title insurance. However, affirmative coverage is specific, customized language that title companies issue to protect the policy holder’s interest in connection with listed exceptions usually listed in Schedule B ( www.practicallaw.com/1-508-6347) of the title insurance policy.
Depending on the particular state and the scope of the local laws regulating title insurance, affirmative insurance is most commonly used in lenders' policies. For example, the title company may insure over a listed exception to the lender's title insurance policy by providing a specific written representation that the violation of a particular covenant or restriction encumbering the title to the real estate will not result in the loss or impairment of the lender's lien on the property.
When insuring over an actual lien or encumbrance that is listed in Schedule B of the title insurance policy, the following language may be used:
The Company hereby insures the Insured against loss sustained or incurred by the Insured not exceeding the amount of this policy, by reason of the enforcement of the lien excepted at No. [EXCEPTION NUMBER] of Schedule B so as to secure full or partial satisfaction thereof out of the land described in Schedule A as a lien encumbering or having priority over the estate or mortgage insured by this policy, as well as such costs, attorneys' fees and expenses in defense against such encumbrance as provided in the conditions and stipulation of this policy.
When insuring over an encroachment that is listed in Schedule B of the title insurance policy, the following language may be used:
The Company insures against loss or damage by reason of the enforcement or attempted enforcement of the lien excepted at No. [EXCEPTION NUMBER] of Schedule B. The Company hereby insures against loss or damage which the Insured shall sustain by reason of the entry of any court order or judgment which constitutes a final determination and denies the right to maintain the existing improvements on the land because of the encroachment or encroachments thereof specifically set forth at exception number [EXCEPTION NUMBER] in Schedule B onto adjoining land.
For more information about the role of title insurance in commercial real estate loans, see Practice Notes, Commercial Real Estate Loans: Due Diligence ( www.practicallaw.com/8-513-3350) and Commercial Real Estate Loans: Closings ( www.practicallaw.com/6-513-3412) .