TITLE POLICY EXCEPTIONS

Exceptions are the title insurance equivalent to pre-existing condition limitations on health care coverage. That is, they narrow the scope of what a policy generally insures. Subdivision covenants are an example of a common exception. Covenants may address the size, height, color and/or style of a home, its landscaping, etc. Covenant violations may result in fines or other penalties that are not covered by title insurance.

An exception may negate a portion of policy coverage entirely. For example, if a property does not abut a dedicated public road, a policy will not insure access. That is not to say the property lacks access. Rather, you assume the risk that rights related to (private) access may be changed or terminated.

It is important for buyers and lenders to read title insurance commitments carefully in order to make sure that policy limitations are acceptable. If an exception causes concern, there are several options:

1. Eliminate the cause of the exception. For example, if a commitment takes exception to a fence that encroaches onto a neighboring property, the proposed insured (buyer and/or lender) could insist that the owner relocate the fence so that it no longer encroaches.

2. Request that our underwriter assume the risk of loss related to the exception. In some instances, for an additional charge, we may be willing to endorse a policy to provide coverage. For example, if a commitment takes exception to surface damage caused by extraction of sub-surface minerals pursuant to a reserved mineral interest, we may be willing to issue an endorsement insuring against that possibility. We may decline to issue an endorsement if we determine that the risk is too high or we may make issuance of an endorsement contingent upon receipt of additional documents, information or assurances.

3. Accept the property as-is. The buyer and/or lender can assume the risk.

4. Terminate the transaction. For a buyer, that means cancelling the purchase contract, for a lender, it amounts to a refusal to make a loan.