Unfortunately, I seldom get questions from articles written in this space. My office assures me that is probably not because no one reads these articles, though I suspect otherwise. Even though I am ecstatic to have the question asked, I promise I did not plant the question and I am glad it occurred to someone that it was important. The question was from a purchaser who had been promised at a closing that her title insurance was all she needed to rest easy about her ownership of property. The question implied that because there was a closing there was title insurance, and because there was title insurance there could be no question of the quality of her title to property.
The answer is not so easy. There is a large body of law about the general subject of insurance and insurance policies. It is sometimes necessary to know that law in order to understand the coverages and exclusions in a policy. It is therefore not so simple as to say that an insurance policy is exactly what it says it is, and that therefore all you must do is read the policy and its exclusions to determine coverage. Nevertheless, reading the policy and its exclusions is the best way to start with a title insurance policy.
Real estate title insurance can be visualized as a three-legged stool. The first leg of that stool is the simplest. It is the identification of the insured party. Where you are the purchaser, your name should appear where the insured party is identified in the policy. That’s easy.
The second leg on which your policy will stand is the description of the property insured. That’s not so easy until you realize that the description should be exactly the property that matches the survey you get with your property, and both should match the deed. In the age of computers it is so easy to make sure the written description in the survey, the deed, and the title policy match, that there should never be an instance where they do not. That does not mean the legal description and easements that may attach to it are easy to follow or understand, because they surely may not be. But they will always match, and the insured can check the legal description with the survey to confirm that the property purchased and the property insured is that which is intended.
The third leg of a title insurance policy is by far the most difficult. It is the page which is called “Schedule B”, the exceptions to the title policy. If a company insured your life, you would feel as if someone would receive the benefit of the policy upon your death. If I wrote an exception into that policy for your death from natural causes, you would have an accidental death policy, which may have some benefit if you are a race car driver. However, if I excepted from your policy death from anynatural or unnatural cause, a careful reader would scratch his head and wonder what’s left. Title insurance for land is exactly the same.
The devil is in the details. If you decline to be bothered by the exceptions to a title insurance policy, you will have no real understanding of your coverage.
If I want desperately to do your closing, for one reason or another, and I realize you have a significant title problem that I can’t fix, or can’t fix in a reasonable amount of time, I could write your title insurance and make an exception for that problem. That exception will appear on Schedule B, and if you don’t bother to look at it or to understand it when you look at it, then I have just made your closing happen without delay, without interruption, and without fixing the problem. Whether or not you should sleep well with that title policy depends completely on the extent of the problem and your good luck.
Every reputable title agent will share Schedule B with the purchaser at or before closing. The purchaser will sign off on Schedule B indicating that he or she has seen it, and has been given a copy of any exception that appears on that schedule. For instance, if an easement, a restrictive covenant, a reservation for mineral interest, or other title exception is merely listed as an exception by book and page on Schedule B, no purchaser or agent will have any idea the significance of that easement or covenant without receiving an actual copy of the restriction, reading it, and evaluating its application to the property.
For example, my client intends to build a commercial laundry on a lot along Eglin Parkway. In my title search (required by law in preparation for writing title insurance) I learn that the lot is a part of a subdivision that has single family residential covenants. Schedule B in the policy will have a numbered paragraph that simply says “… subject to a declaration that appears at OR Book____, Page _____, Public Records of Okaloosa County”. Unless the purchaser happens to know what that Declaration is, the bare contents of Schedule B will not disclose the single family restriction. The Purchaser must be given a copy of the document.
Please understand that this discussion of the detail of a title insurance policy is not academic. I have seen policies written with exceptions so broad they offered very little protection to the purchaser, and I’ve seen closings done where the purchaser was paintfully surprised to learn that a one line disclosure in schedule B was useless.
This question could be posed slightly differently by asking whether all title insurance policies offer the same degree of protection. The answer is “absolutely not.” The question also exemplifies well the reasons for dealing with a real estate lawyer who represents the Purchaser, or a reputable, professional, title insurance company.
I hope I’ve answered the question, and I appreciate it being asked.
