Because the property to be insured or any part thereof may be occupied or physically claimed by someone other than the record owner, Schedule B of any title policy must contain an exception (unless an inspection reveals no parties in possession, or information furnished to the Company in the form of an affidavit, or in some cases, an affidavit and a survey, allows the Company to delete the exception) as follows:
"Rights or claims of parties in possession not shown by the public records"
Judicial Construction Of The "Rights Of Parties In Possession" Exception
In determining the applicability of the exception clause, the courts in a number of cases have examined the extent or degree of possession by the party asserting rights or claims to the property involved. The exception as to rights of parties in possession has been held applicable where there was actual or open and visible possession by the party asserting rights in the property of the insured, such possession sufficiently notifying the insured of the existence of the rights asserted. However, where there was no actual or open and visible possession by the party asserting rights in the property involved, the exception clause relating to rights of parties in possession has been held not applicable so as to relieve the insurer of liability.