Selecting a title company for a transaction is influenced by a
number of factors, including the level of customer service,
responsiveness and sophistication (particularly when dealing with
complex commercial transactions). Knowledgeable and responsive
escrow officers and underwriters can facilitate closings
tremendously. However, underwriting guidelines may adversely affect
an underwriter's ability to deliver an acceptable title
insurance policy.
Recently, title underwriters have changed underwriting guidelines
regarding matters shown on an updated ALTA survey. Traditionally,
title companies agreed to limit survey related exceptions to
"as shown on the survey" based on an ALTA survey. Now,
despite providing an updated ALTA survey for the insured property,
a title company in a recent deal involving Indiana real estate was
unwilling to limit survey related matters to "as shown on the
survey" when the client requested the survey deletion
endorsement to its title policy. The title company attempted to
limit its coverage relative to survey issues by inserting "as
approximately shown on the survey" based on the recent ruling
in Lawyers Title Insurance Corporation v.
Doubletree Partners, L.P., (5th Circuit, January 14,
2014). In the Doubletree Partners case, which involved Texas
property and a Texas title policy, the insured obtained the survey
deletion coverage and the title insurance company was liable for
damages suffered as a result of a flowage easement affecting the
property that was not accurately reflected on the survey. As a
result of the Doubletree Partners case, the title company changed
its national underwriting guidelines which are now out of step with
other insurers.
Oil, gas and mineral leases offer another example of a title
company changing its underwriting guidelines in a manner
inconsistent with longstanding practice and the title insurance
market as a whole. Typically, oil and gas leases affecting real
property where the primary term has expired, are removed as
exceptions to title by the title company upon producing an
affidavit of non-production. However, many title underwriters
refuse to remove expired oil and gas leases based on an affidavit
of non-production and, in many cases, will not remove expired oil
and gas leases absent a release of the lease, contrary to generally
accepted practice within the industry.
The insured is not without options. If a title insurer insists on
denying these or other coverages inconsistent with standard
practice in the industry, do not hesitate to push back or to
transfer the transaction to another title company.
This article is presented for informational purposes only and is not intended to constitute legal advice.