14.12 Owner's Policy

14.12.1

In General

The most popular forms of owner's policies are modeled after the American Land Title Association (ALTA) Owner's Policy form. Review of said policy forms were made in 1969, 1970, 1984, 1987 and 1990.

The ALTA Owner's Policy form consists, essentially of five parts:

  • The basic contractual undertakings of the Company: what the Company insures.
  • The "Exclusion from Coverage": specific exclusions from coverage.
  • The "Conditions and Stipulations": information relative to the Company's insurance obligations, definition of terms, and notice and defense provisions pertaining to claims arising under the policy.
  • Schedule "A": the specifics of the particular policy that is being issued. These specifics include:

    • Policy number
    • Date of Policy
    • Amount of Insurance
    • Name of the Insured
    • Estate of Interest Being Insured
    • Vesting of Title
    • Description of Land

  • Schedule "B": the specific matters that affect the land being insured. It includes two basic sub-parts:

    • Certain preprinted "general exceptions" which are included in every standard owner's policy.
    • "Special exceptions" relative to the particular piece of land being insured.

14.12.2

Coverage Afforded Through the Insurance Provisions Of An Owner's Policy

The following are the standard ALTA Insuring Provisions of an Owner's Policy:

  • ALTA Owner's Policy - Form A - Amended 10-17-70

    Subject to the exclusions from coverage, the exceptions contained in schedule b and the provisions of the conditions and stipulations hereof, Stewart Title Guaranty Company, a corporation of Galveston, Texas, herein called the Company, insures, as of Date of Policy shown in Schedule A, against loss or damage, not exceeding the amount of insurance stated in Schedule A, costs, attorneys' fees and expenses which the Company may become obligated to pay hereunder, sustained or incurred by the insured by reason of:

    • Title to the estate or interest described in Schedule A being vested otherwise than as stated therein;
    • Any defect in or lien or encumbrance on such title;
    • Lack of a right of access to and from the land.

  • ALTA Owner's Policy-Amended 10-17-70

    Subject to the exclusions from coverage, the exceptions contained in Schedule B and the provisions of the conditions and stipulations hereof, Stewart Title Guaranty Company, a corporation of Galveston, Texas, herein called the Company, insures, as of Date of Policy shown in Schedule A, against loss or damage, not exceeding the amount of insurance stated in Schedule A, costs, attorneys' fees and expenses which the Company may become obligated to pay hereunder, sustained or incurred by the insured by reason of:

    • Title to the estate or interest described in Schedule A being vested otherwise than as stated therein;
    • Any defect in or lien or encumbrance on such title;
    • Lack of a right of access to and from the land; or
    • Unmarketability of such title.

  • ALTA Owner's Policy - 1970 - (Amended 1984)

    Subject to the exclusions from coverage, the exceptions contained in Schedule B and the provisions of the conditions and stipulations hereof, Stewart Title Guaranty Company, a corporation of Galveston, Texas, herein called the Company, insures, as of Date of Policy shown in Schedule A, against loss or damage, not exceeding the amount of insurance stated in Schedule A, costs, attorneys' fees and expenses which the Company may become obligated to pay hereunder, sustained or incurred by the insured by reason of:

    • Title to the estate or interest described in Schedule A being vested otherwise than as stated therein;
    • Any defect in or lien or encumbrance on such title;
    • Lack of a right of access to and from the land; or
    • Unmarketability of such title.

  • ALTA Owner's Policy - 1987 & 1990

    Subject to the exclusions from coverage, the exceptions from coverage contained in Schedule B and the conditions and stipulations, Stewart Title Guaranty Company, a Texas corporation, herein called the Company, insures, as of Date of Policy shown in Schedule A, against loss or damage, not exceeding the Amount of Insurance stated in Schedule A, sustained or incurred by the insured by reason of:

    • Title to the estate or interest described in Schedule A being vested other than as stated therein;
    • Any defect in or lien or encumbrance on the title;
    • Unmarketability of the title;
    • Lack of a right of access to and from the land.

The Company will also pay the costs, attorneys' fees and expenses incurred in defense of the title, as insured, but only to the extent provided in the Conditions and Stipulations.

14.12.3

Exclusions From Coverage (Owner's Policy)

Owner's Policy - Form A - 1970

The following matters are expressly excluded from the coverage of this policy:

  • Any law, ordinance or governmental regulation (including but not limited to building and zoning ordinances) restricting or regulation or prohibiting the occupancy, use or enjoyment of the land, or regulating the character, dimensions or location of any improvement now or hereafter erected on the land, or prohibiting a separation in ownership or a reduction in the dimensions or area of the land, or the effect of any violation of any such law, ordinance or governmental regulation.

  • Rights of eminent domain or governmental rights of police power unless notice of the exercise of such rights appears in the public records at Date of Policy.

  • Defects, liens, encumbrances, adverse claims, or other matters (a) created, suffered, assumed or agreed to by the insured claimant, (b) not known to the Company and not shown by the public records but known to the insured claimant either at Date of Policy or at the date such claimant acquired an estate or interest insured by this policy and not disclosed in writing by the insured claimant to the Company prior to the date such insured claimant became insured hereunder; (c) resulting in no loss or damage to the insured claimant; (d) attaching or created subsequent to Date of Policy; or (e) resulting in loss or damage which would not have been sustained if the insured claimant had paid value for the estate or interest insured by this policy.

  • The refusal of any person to purchase, lease or lend money on the estate or interest covered hereby in the land described in Schedule A.

Owner's Policy - 1970

The following matters are expressly excluded from the coverage of this policy:

  • Any law, ordinance or governmental regulation (including but not limited to building and zoning ordinances) restricting or regulating or prohibiting the occupancy, use or enjoyment of the land, or regulating the character, dimensions or location of any improvement now or hereafter erected on the land, or prohibiting a separation in ownership or a reduction in the dimensions or area of the land, or the effect of any violation of any such law, ordinance or governmental regulation.

  • Rights of eminent domain or governmental rights of police power unless notice of the exercise of such rights appears in the public records at Date of Policy.

  • Defects, liens, encumbrances, adverse claims, or other matters (a) created, suffered, assumed or agreed to by the insured claimant (b) not known to the Company and not shown by the public records but known to the insured claimant either at Date of Policy or at the date such claimant acquired an estate or interest insured by this policy and not disclosed in writing by the insured claimant to the Company prior to the date such insured claimant became an insured hereunder; (c) resulting in no loss or damage to the insured claimant; (d) attaching or created subsequent to Date of Policy; or (e) resulting in loss or damage which would not have been sustained if the insured claimant had paid value for the estate or interest insured by this policy.

Owner's Policy - 1970 (Amended 1984)

The following matters are expressly excluded from the coverage of this policy:

  • Including:

    (a) Governmental police power.

    (b) Any law, ordinance or governmental regulation relating to environmental protection,

    (c) Any law, ordinance or governmental regulation (including but not limited to building and zoning ordinances) restricting or regulating or prohibiting the occupancy, use or enjoyment of the land, or regulating the character, dimensions or location of any improvement now or hereafter erected on the land, or prohibiting a separation in ownership or a change in the dimensions or area of the land or any parcel of which the land is or was a part.

    (d) The effect of any violation of the matter excluded under (a), (b), or (c) above, unless notice of a lien or encumbrance resulting from a violation has been recorded at Date of Policy in those records in which under state statutes deed, mortgages, lis pendens, liens or other title encumbrances must be recorded in order to impart constructive notice to purchasers of the land for value and without knowledge; provided, however, that without limitation, such records shall not be construed to include records in any of the offices of the federal, state or local environmental protection, zoning, building, health or public safety authorities.

  • Rights of eminent domain or governmental rights of police power unless notice of the exercise of such rights appears in the public records at Date of Policy.

  • Defects, liens, encumbrances, adverse claims, or other matters (a) created, suffered, assumed or agreed to by the insured claimant (b) not known to the Company and not shown by the public records but known to the insured claimant either at Date of Policy or at the date such claimant acquired an estate or interest insured by this policy and not disclosed in writing by the insured claimant to the Company prior to the date such insured claimant became an insured hereunder; (c) resulting in no loss or damage to the insured claimant; (d) attaching or created subsequent to Date of Policy; or (e) resulting in loss or damage which would not have been sustained if the insured claimant had paid value for the estate or interest insured by this policy.

Owner's Policy - 1987 & 1990

The following matters are expressly excluded from the coverage of this policy and the Company will not pay loss or damage, costs, attorneys' fees or expenses which arise by reason of:

  • Any law, ordinance or governmental regulation (including but not limited to building, zoning laws, ordinances or regulations) restricting, regulating, prohibiting or relating to (i) the occupancy, use or enjoyment of the land; (ii) the character, dimensions or location of any improvement now or hereafter erected on the land; (iii) a separation in ownership or a change in the dimensions or area of the land or any parcel of which the land is or was a part; or (iv) environmental protection, or the effect of any violation of these laws, ordinances or governmental regulations, except to the extent that a notice of the enforcement thereof or a defect, lien or encumbrance resulting from a violation or alleged violation affecting the land has been recorded in the public records at Date of Policy.

  • Any governmental police power now excluded by (a) above, except to the extent that a notice of the exercise thereof or a notice of a defect, lien or encumbrance resulting from a violation or alleged violation affecting the land has been recorded in the public records at Date of Policy.

  • Rights of eminent domain unless notice of the exercise thereof has been recorded in the public records at Date of Policy, but not excluding from coverage any taking which has occurred prior to Date of Policy which would be binding on the rights of a purchaser for value without knowledge.

  • Defects, liens, encumbrances, adverse claims or other matters:

    • Created, suffered, assumed or agreed to by the insured claimant;
    • Not known to the Company, not recorded in the public records at Date of Policy, but known to the insured claimant and not disclosed in writing to the Company by the insured claimant prior to the date the insured claimant became an insured under this policy;
    • Resulting in no loss or damage to the insured claimant;
    • Attaching or created subsequent to Date of Policy; or
    • Resulting in no loss or damage which would not have been sustained if the insured claimant had paid value for the estate or interest insured by this policy.

14.12.4

Conditions And Stipulations Of The Owner's Policy

See policy jackets of the Owner's Policy forms 1970, 1987, 1990 and 1992 attached herewith.

14.12.5

Distinction Between Policy Form-A And Form-B

There is one distinction between the ALTA Owner's Form B and Form A policies: the Form B policy insures against loss or damage suffered by reason of unmarketability of title while the Form A does not. That is, in addition to the three areas of affirmative coverage stated on the face of the Form A policy jacket, the Form B policy jacket adds a fourth area of affirmative coverage specifying that the title insurance company insures against loss or damage suffered by reason of, ?4. Unmarketability of such title.? Since the Form B owner's policy does insure against loss or damage suffered by reason of unmarketability, the Exclusions from Coverage contain only three exclusions, not four as is the case with Form A.

14.12.6

Schedule A Of The Owner's Policy

Policy Number

Every owner's policy must have a designated number for purposes of reference and identification. Generally, these policy numbers are preprinted on the policy jackets. The policy numbers, either preprinted or typed, must coincide with the policy numbers to be typed on Schedule A.

Additionally, if the issuing office has a file or case or order number system, said numbers should always be shown on the policy. This will act as a cross reference to the files in the issuing office.

Date of Policy

The date and time (month, day, year, hour, minute) of the policy must coincide with the date and time of recording of the last instrument to be reflected in the policy, either as an exception or creating the interest being insured. It should be no later.

Amount of Insurance - In General

An owner's policy must always be written for the amount of the purchase price, but in the event no sale is involved, then, for the present fair market value of the premises in question, including improvements, except under the following circumstances:

Where the premises are unimproved, but the owner intends to erect improvements thereon in the immediate future, the policy may be written for the value or purchase price of the vacant land and the estimated cost of the improvements to be erected thereon, but if so written, the following must be inserted at the end of Schedule B of the policy:

Note: It is agreed between the Company and the insured that, in the event of a loss hereunder, the liability of the Company shall be limited to the present value of said land as now improved, but shall automatically increase by the amount expended for improvements placed thereon in good faith, and without actual notice of adverse claim, but in no event shall exceed the amount of this policy, to wit,
$ (here insert amount shown in the insuring clause of the policy.)

Name of the Insured

Item No. 1 of Schedule A of an owner's policy shows the following:

"1. Name of Insured."

The "insured" is the person or persons or the entity for whose benefit the owner's policy is written.

The "insured" will normally be a purchaser and its name or names must be the same as the vestee of the estate or interest insured.

It should be recognized, however, that by definition the insured extends not only to the name insured, but also to:

"those who succeed to the interest of such insured by operation of law as distinguished from purchase including, but not limited to, heirs, distributees, devisees, survivors, personal representatives, next of kin, or corporate fiduciary successors."

On occasion, the named insured may not be the party in whose name title is vested.

Estate or Interest Being Insured

The estate or interest in the land being insured must be properly set forth, in the same manner as stated in the instrument under which title was acquired by the party to be insured (or by the party in whose name title is vested).

Item No. 2 Schedule A of the 1970 Form shows the paragraph as follows:

"2. The estate or interest in the land described herein and which is covered by this policy is: Fee Simple"

As printed, the language in this paragraph precludes the use of this policy form for any interest or estate other than a fee. In the event the form is used for any lesser interest or estate, the printing must be amended accordingly (leasehold estate, easement estate, etc.).

Item No. 2 Schedule A of the 1987 and 1990 Form shows the paragraph as follows:

"2. The estate or interest in the land which is covered by this policy is:"

It is necessary to insert the estate or interest (Fee Simple, Easement, etc.)

Vesting of Title

Item No. 3 of Schedule A of the 1970 Form shows the following:

"3. The estate or interest referred to herein is at Date of Policy vested in the Insured."

As printed, the language in this paragraph precludes the use of this policy form for any interest or estate not vested in the Insured.

In the event the form is used for insuring any other but the record owner, the printing must be amended accordingly. ("The insured" must be eliminated and in lieu thereof the name of the party vested with the record title must be inserted.)

Item No. 3 of Schedule A of the 1987 and 1990 Form shows the paragraph as follows:

"3. Title to the estate or interest in the land is vested in:

This makes necessary the insertion of the name of the party in whose name title is vested.

(See 4.16 Deeds of Conveyance)

Description of the Land

Schedule A, Item No. 5 of the 1970 Form and Item No. 4 of the 1987 and 1990 Form show the following:

"(4) The land referred to in this policy is described as follows:"

It is of primary importance the sufficiency of the legal description to enable a competent surveyor to locate the property on the ground.

By policy definition, "land" means "the land described specifically...in Schedule A, and the improvements affixed" to the land which constitute real property. As is evident, the title to personal property is not included in the coverage of a title insurance policy.

The legal description of an area of land, if no exclusions appear, includes the surface, the soil and minerals underneath the surface, the air space above it, trees and growing crops, buildings and other structures permanently affixed to it, etc. While most title policies cover all of the land, it is possible to insure some constituent part of the land if this is specified in the Schedule A description of the land.

14.12.7

Difference Between Schedule A Of ALTA Owner's 1970 Policy Form And Schedule A Of The 1987 And 1990 Policy Form

Item No. 4 of Schedule A of the ALTA Owner's 1970, reads as follows:

"4. The land herein described is encumbered by the following mortgage or trust deed, and assignments".

Schedule A of the ALTA Owner's 1987 and 1990 does not contain the above item.

14.12.8

Schedule B Of The Owner's Policy

Schedule B of the owner's policy lists matters which are not embraced within the insurance of a particular parcel of land.

In an owner's policy, Schedule B is divided into two parts, the general and the special exceptions. The general exceptions state those matters which are excluded from coverage generally. These matter are either not within scope of the matters examined by the title insurer in preparation of the issuance of the title insurance policy or they would not be reflected by an examination of the public records. The special exceptions are exceptions relating to defects, encumbrances, liens, covenants, restrictions or other matters affecting only the particular property being insured.

The "general" exceptions are sometimes referred to as "standard" or "preprinted" exceptions. In most instances there are five such exceptions. In certain states the number may increase in order to include matters of "mining claims", "water rights", "patent reservations", restrictive covenants", "spousal rights," etc. The general exceptions may be eliminated from an owner's title insurance policy. The deletion of any or all of the "general", "standard", or "preprinted" exceptions from the owner's policy is considered "extended coverage." Certain procedures must be followed and certain requirements must be met in order to accomplish said deletion. (See Extended Coverage 5.32).

Schedule B of an ALTA Owner's Policy reads as follows:

  • 1970 Policy
    This policy does not insure against loss or damage by reason of the following exceptions:

  • 1987 and 1990 Policy
    This policy does not insure against loss or damage (and the Company will not pay costs, attorneys' fees or expenses) which arise by reason of:

General Exceptions

Rights or claims of parties in possession not shown by the public records.

Encroachments, overlaps, boundary line disputes, and any other matters which would be disclosed by an accurate survey and inspection of the premises.

Easements or claims of easements not shown by the public records.

Any lien, or right to a lien, for services, labor, or material heretofore or hereafter furnished, imposed by law and not shown by the public records.

Taxes or special assessments which are not shown as existing liens by the public records.

Note: It is imperative to understand the meaning, scope and limitations of each of the above exceptions.

14.12.9

Countersignature On A Owner's Policy

An authorized signatory should countersign the policy in the appropriate space on the jacket and on each page of Schedule B. In addition, the issuing agent's full name, address, and phone number should appear on the jacket.

14.12.10

Increasing The Amount Of Insurance Of An Existing Owner's Policy

Under certain circumstances, the amount of insurance of an existing owner's policy may be increased through the issuance of an endorsement.

Before issuing the endorsement, the following points must be considered:

  • Why is the increase being considered?
  • Did the Company issue any future increase endorsement?
  • Has a rundown search of the records been made?
  • Has any intervening matter been found?
  • If any found, does it have any bearing on the Company's liability under the policy?
  • If the original policy deleted any of the ?general exceptions?, is the exception being reinserted, or is the proper documentation being obtained in order to authorize its further deletion?

14.12.11

Agreeing To A Future Increase In The Amount Of Insurance On An Owner's Policy

Occasionally developers purchase title insurance at the time the insured property is vacant or at a time prior to completion of construction of the improvements on the property. Insurance is purchased to cover the unimproved value of the property in an attempt to protect initial investments during a long term development. However, between the date when construction begins and the date it is completed, there is a growing disparity in regard to the market value of the property and the outstanding amount of title insurance to such an extent that the insured may not be able to recover the actual loss should there be a claim on the policy. Consequently, title insurance companies are being asked to agree at the time the initial commitment is issued that, upon application of the insured, they will increase the amount of the insurance on the outstanding policy or issue a new policy for the increased amount.

It should be remembered that a commitment by the Company, to increase the amount of a title insurance policy for the purposes of conveying future improvements or appreciation in the value of the land at the request of the insured and at a later date, is tantamount to a policy for such increased insurance immediately and without the appropriate premium.

It is much more desirable to have a good faith estimate of the additional amount of insurance made at the outset and included in the initial issuance of the policy. (See Amount of Policy 1.56).

However, because this is not always feasible, the Company is willing to agree to increase the amount of insurance if the insured makes a binding agreement to purchase such increased insurance as soon as the further improvements are made and within a definite period of time. Prior to issuance of this endorsement, you must obtain approval of your Stewart underwriting counsel.

14.12.12

Amount Of Insurance Being Requested Is Substantially Less Than The Market Value Of The Property

When the amount of insurance is substantially less than the market value of the property, the following note must be shown in Schedule A:

"In consideration of the issuance of this policy at the request of the insured for an amount less than the market value of the land described in Schedule A, the insured accepts this policy upon the condition that in the event any loss or damage occurs to the insured by reason of any defects in the title to the estate or interest in the land not shown in Schedule B, the Company shall be liable only for the proportion of the loss or damage which the amount of the policy bears to the market value of the land at the time of any such loss or damage: and upon the further condition that in the event the Company is called upon under the policy to provide for the defense of the insured in any litigation affecting the title to the estate or interest in the land, the insured agrees to pay the same proportion of the cost for the defense, including court costs and attorneys' fees, as the market value of the land less the face amount of the policy bears to the market value of the land and to indemnify the Company therefor before it undertakes to provide such defense."

14.12.13

Apportionment Of Amount Of Insurance When Two Or More Parcels Are Insured By The Same Policy

The ALTA Owner's policy forms contain in the Conditions and Stipulations a clause providing for apportionment of insurance between two or more parcels covered by the same policy. For most stipulations, this formula is adequate. There are other situations, however, in which it may be desirable from the standpoint of the Company, or the insured, or both, for a definite dollar amount to be allocated. This is customarily arrived at by negotiation.

In those cases in which an owner's policy is issued covering several parcels of land and a definite dollar amount of liability is to be allocated to each parcel the amount of insurance should be allocated to each parcel by inserting the following note at the end of Schedule B of the policy:

Note: The face amount of this policy is allocated to the various parcels, the title to which is insured, as hereinafter set forth, and in the event of a loss is established affecting one or more, but not all of such parcels, such loss shall be computed and settled on the basis of the insurance on such parcel or parcels as follows:


Parcel I the amount of $ ____________.

Parcel II the amount of $ _____________.

14.12.14

Insuring Other Than The Record Owner

Under certain circumstances it is permissible to issue an owner's policy naming as the insured one other than the owner of the estate or interest described in the policy.

This kind of insurance presupposes:

  • The existence of a non-record owner, who has a determinable and insurable interest in the land and who is susceptible to suffer loss or damage if a cause of action arises against the Company under the policy.
    Examples of circumstances where a non-owner named insured may suffer such loss or damage are:

    • One purchasing under an installment contract in reliance upon the vendor's representation as to the quantity and quality of the vendor's ownership.

    • One purchasing the stock of an existing corporation in reliance upon the seller's representation as to the quantity and quality of the corporation's ownership.

  • The insertion of the following statement in Schedule B of the policy:
    "The rights of the insured under this policy shall also be subject to the defenses, if any, which the Company might have against the party shown vested with the estate or interest in the land described in Schedule A as if said party were the insured under this policy."

14.12.15

Duplicate Of An Original Owner's Policy

When requested to issue, in conjunction with the issuance of an owner's policy, a duplicate thereof, the following note must be shown after the last exception as the duplicate policy.

Note: This policy is a true copy of Stewart Title Guaranty Company Owner's Policy No: _____ , and this copy is issued by the Company and accepted by the Insured herein upon the agreement and understanding that no further or additional liability is assumed or incurred by the Company, by reason of the issuance of this copy of said policy.

14.12.16

Duplicate Of A Lost Owner's Policy

When requested to issue a duplicate owner's policy in lieu of an owner's policy which has been lost or destroyed, the following is required:

  • The duplicate policy number must be given a new number.
  • The following note must be shown after the last exception on the duplicate policy:

Note: This duplicate owner's policy replaces Stewart Title Guaranty Company Policy No. ______ which has been lost or destroyed. It is understood that this duplicate evidences the liability of this Company under its original policy and that such liability is not increased or diminished by reason of the issuance of this duplicate policy.

14.12.17

Assignment Of Owner's Policy

See 1.80 Assignment of Owner's Policy.