Stewart Title Guaranty Company has experienced significant claims because of outstanding rights to mineral and other substances that were not excepted in the title insurance policy.
These losses often have occurred because the search of title was not long enough to discover the severance of rights in mineral and other substances, or because the title insurance agent relied on a starter, such as a prior title insurance policy.
Add the following exception in Schedule B of each Commitment, Binder, or Policy, other than a Short Form Loan Policy, unless you secure Underwriter approval to remove or modify the exception. Deletion or modification of the exception generally will be based upon an extended search and examination required by the Underwriter and/or consideration of any state law reserving mineral or similar rights apart from patent reservations.
"Minerals of whatsoever kind, subsurface and surface substances, including but not limited to coal, lignite, oil, gas, uranium, clay, rock, sand and gravel in, on, under and that may be produced from the Land, together with all rights, privileges, and immunities relating thereto, whether or not appearing in the Public Records or listed in Schedule B. The Company makes no representation as to the present ownership of any such interests. There may be leases, grants, exceptions or reservations of interests that are not listed."
A starter may not be relied upon for the search and examination required to remove this exception.
Always include in Schedule B any specific grant, reservation, or lease of minerals or other substances (such as caliche, gravel, rock, coal, lignite) that your search reflects. You should also add the following at the end of the specific exception (although the policy does not insure the title to any interest that is excepted): "The Company makes no representation as to the present ownership of any such interests. There may be leases, grants, exceptions or reservations of interests that are not listed."
If you have customarily included a patent and waters exception, you should continue to do so. A common patent exception is: "(a) Unpatented mining claims; (b) reservations or exceptions in patents or in Acts authorizing the issuance thereof; (c) water rights, claims or title to water, whether or not the matters excepted under (a), (b) or (c) are shown by the Public Records." If you remove any patent exception, you should review the patent and be satisfied that applicable state or federal law enabling the patents does not reserve any minerals or similar rights.
The foregoing policy does not affect the potential availability of endorsements that provide coverage for damage to buildings or improvements on the land resulting from the future exercise of any right to use the surface of the land for the extraction or development of minerals or any other subsurface substances, such as the ALTA 9-06 series and the ALTA 35-06 series, pursuant to applicable Guidelines.
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