Title Insurance Policies

THE NEW AND IMPROVEDTHE NEW AND IMPROVEDALTA 2006 TITLE POLICY FOR ALTA 2006 TITLE POLICY FOR

OWNER AND LOAN POLICIESOWNER AND LOAN POLICIES

To be issued by all title insurance To be issued by all title insurance companies as a replacement for the 1992 companies as a replacement for the 1992

ALTA policy ALTA policy

THREE NEW POLICIESTHREE NEW POLICIES

1. The 2006 ALTA Owner’s Policy1. The 2006 ALTA Owner’s Policy 2.2. The 2006 ALTA Loan PolicyThe 2006 ALTA Loan Policy 3.3. The 2006 ALTA Short Form The 2006 ALTA Short Form

Residential Loan PolicyResidential Loan Policy

All of the above policies have been All of the above policies have been adopted by American Land Title adopted by American Land Title Association (ALTA) as of July 17, 2007.Association (ALTA) as of July 17, 2007.

Outgoing Policy FormsOutgoing Policy Forms

• The 1992 ALTA policy forms and The 1992 ALTA policy forms and related endorsements may still be related endorsements may still be available upon request. available upon request.

Why change the policy?Why change the policy?

The last form was originally known as The last form was originally known as the 1987 forms, but then amended in the 1987 forms, but then amended in 1992 by the addition of the Creditor’s 1992 by the addition of the Creditor’s Rights exclusion. Rights exclusion.

A major goal in creating the revised A major goal in creating the revised form was to eliminate terms form was to eliminate terms considered to be EXCLUSIONS TO considered to be EXCLUSIONS TO THE EXCLUSIONS. THE EXCLUSIONS.

Covered RisksCovered Risks

The COVERED RISKS section of the The COVERED RISKS section of the 2006 policies replace the old 2006 policies replace the old “insuring clauses” section of the prior “insuring clauses” section of the prior form of policy.form of policy.

The significant changes to coverages The significant changes to coverages are as follows:are as follows:


Section 1. Section 1.

Title being vested other than as Title being vested other than as stated in Schedule A. stated in Schedule A.

(the word “Title” is defined later in (the word “Title” is defined later in the policy to mean the estate or the policy to mean the estate or interest described in Schedule A)interest described in Schedule A)

Covered RisksCovered Risks Section 2: Section 2: Any defect in or lien or encumbrance on the title, including Any defect in or lien or encumbrance on the title, including

insurance against loss from a defect in Title caused by:insurance against loss from a defect in Title caused by:

Fraud, forgery, undue influence, duress, incompetency, incapacity or impersonation,Fraud, forgery, undue influence, duress, incompetency, incapacity or impersonation,

Failure of any person or Entity to have authorized a transfer or conveyance; Failure of any person or Entity to have authorized a transfer or conveyance;

A document affecting title not properly created, executed,…notarized or delivered.A document affecting title not properly created, executed,…notarized or delivered.

Failure to perform those acts necessary to create a document by electronic means Failure to perform those acts necessary to create a document by electronic means authorized by law.authorized by law.

A document executed under a falsified expired or otherwise invalid power of attorney.A document executed under a falsified expired or otherwise invalid power of attorney.

Taxes due or payable but unpaid (carve out here in the GAP coverage regarding Taxes due or payable but unpaid (carve out here in the GAP coverage regarding future taxes or insurance after closing and prior to recording of the documents)future taxes or insurance after closing and prior to recording of the documents)

Covered RisksCovered Risks Section 2: Section 2: Any defect in or lien or encumbrance on the title, including insurance against loss Any defect in or lien or encumbrance on the title, including insurance against loss

from a defect in Title caused by:from a defect in Title caused by:

Fraud, forgery, undue influence, duress, incompetency, Fraud, forgery, undue influence, duress, incompetency, incapacity or impersonation,incapacity or impersonation,






::




Failure of any person or Entity to have authorized a transfer Failure of any person or Entity to have authorized a transfer or conveyance; or conveyance;









A document affecting title not properly created, executed,…A document affecting title not properly created, executed,…notarized or delivered.notarized or delivered.









Failure to perform those acts necessary to create a Failure to perform those acts necessary to create a document by electronic means authorized by law.document by electronic means authorized by law.









A document executed under a falsified expired or A document executed under a falsified expired or otherwise invalid power of attorney.otherwise invalid power of attorney.









Taxes due or payable but unpaid (carve out here in the GAP Taxes due or payable but unpaid (carve out here in the GAP coverage regarding future taxes or insurance after closing coverage regarding future taxes or insurance after closing and prior to recording of the documents)and prior to recording of the documents)

Survey coverageSurvey coverage A covered risk includes:A covered risk includes:

2.c: Any encroachment, encumbrance, violation, 2.c: Any encroachment, encumbrance, violation, variation or adverse circumstance affecting the Title variation or adverse circumstance affecting the Title that would be disclosed by an accurate and complete that would be disclosed by an accurate and complete land survey of the Land. The term “encroachment” land survey of the Land. The term “encroachment” includes only existing improvements. includes only existing improvements.

Note that an ALTA 9 allows for coverage over Note that an ALTA 9 allows for coverage over damage to future improvements but only as to damage to future improvements but only as to parties enforcing surface mineral rights, not as to parties enforcing surface mineral rights, not as to encroachments. You may be able to convince the encroachments. You may be able to convince the title company to amend the ALTA 9 to eliminate the title company to amend the ALTA 9 to eliminate the word “existing” and thereby receive coverage over word “existing” and thereby receive coverage over future improvements. future improvements.


3. Unmarketable Title: 3. Unmarketable Title:

The definition of this term has been The definition of this term has been expanded in the 2006 Policy to expanded in the 2006 Policy to include coverage when a lessee is include coverage when a lessee is released from an obligation to lease released from an obligation to lease or a lender is released from an or a lender is released from an obligation to lend due to a obligation to lend due to a contractual condition requiring the contractual condition requiring the delivery of marketable title. delivery of marketable title.

Covered RisksCovered Risks 4. No right of Access (same coverage)4. No right of Access (same coverage)

5. The violation or enforcement of any law, ordinance, permit or 5. The violation or enforcement of any law, ordinance, permit or governmental regulation (including zoning and building)…if notice governmental regulation (including zoning and building)…if notice setting forth the violation had been provided in the public record, setting forth the violation had been provided in the public record, and was not shown on Schedule B as an exception.and was not shown on Schedule B as an exception.

6. Enforcement based on police power if notice of the 6. Enforcement based on police power if notice of the enforcement action had been provided in the public record, and enforcement action had been provided in the public record, and was not shown on Schedule B as an exceptionwas not shown on Schedule B as an exception

7. Exercise of right of eminent domain if a notice of the exercise 7. Exercise of right of eminent domain if a notice of the exercise had been provided in the public record, and was not shown on had been provided in the public record, and was not shown on Schedule B as an exception. Schedule B as an exception.

8. Any taking that has occurred and is binding on the rights of 8. Any taking that has occurred and is binding on the rights of Purchaser for value and without Knowledge.Purchaser for value and without Knowledge.


5. The violation or enforcement of any law, ordinance, 5. The violation or enforcement of any law, ordinance, permit or governmental regulation (including zoning and permit or governmental regulation (including zoning and building)…if notice setting forth the violation had been building)…if notice setting forth the violation had been provided in the public record, and was not shown on provided in the public record, and was not shown on Schedule B as an exception.Schedule B as an exception.

6. Enforcement based on police power if notice of the enforcement action 6. Enforcement based on police power if notice of the enforcement action had been provided in the public record, and was not shown on Schedule B had been provided in the public record, and was not shown on Schedule B as an exceptionas an exception

7. Exercise of right of eminent domain if a notice of the exercise had been 7. Exercise of right of eminent domain if a notice of the exercise had been provided in the public record, and was not shown on Schedule B as an provided in the public record, and was not shown on Schedule B as an exception. exception.

8. Any taking that has occurred and is binding on the rights of Purchaser 8. Any taking that has occurred and is binding on the rights of Purchaser for value and without Knowledge.for value and without Knowledge.


5. The violation or enforcement of any law, ordinance, permit or 5. The violation or enforcement of any law, ordinance, permit or governmental regulation (including zoning and building)…if notice setting governmental regulation (including zoning and building)…if notice setting forth the violation had been provided in the public record, and was not forth the violation had been provided in the public record, and was not shown on Schedule B as an exception.shown on Schedule B as an exception.

6. Enforcement based on police power if notice of the 6. Enforcement based on police power if notice of the enforcement action had been provided in the public record, enforcement action had been provided in the public record, and was not shown on Schedule B as an exceptionand was not shown on Schedule B as an exception

7. Exercise of right of eminent domain if a notice of the exercise had been 7. Exercise of right of eminent domain if a notice of the exercise had been provided in the public record, and was not shown on Schedule B as an provided in the public record, and was not shown on Schedule B as an exception. exception.



5. The violation or enforcement of any law, ordinance, permit or 5. The violation or enforcement of any law, ordinance, permit or governmental regulation (including zoning and building)…if notice setting governmental regulation (including zoning and building)…if notice setting forth the violation had been provided in the public record, and was not forth the violation had been provided in the public record, and was not shown on Schedule B as an exception.shown on Schedule B as an exception.

6. Enforcement based on police power if notice of the enforcement action 6. Enforcement based on police power if notice of the enforcement action had been provided in the public record, and was not shown on Schedule B had been provided in the public record, and was not shown on Schedule B as an exceptionas an exception

7. Exercise of right of eminent domain if a notice of the 7. Exercise of right of eminent domain if a notice of the exercise had been provided in the public record, and was exercise had been provided in the public record, and was not shown on Schedule B as an exception. not shown on Schedule B as an exception.



5. The violation or enforcement of any law, ordinance, permit or 5. The violation or enforcement of any law, ordinance, permit or governmental regulation (including zoning and building)…if notice governmental regulation (including zoning and building)…if notice setting forth the violation had been provided in the public record, setting forth the violation had been provided in the public record, and was not shown on Schedule B as an exception.and was not shown on Schedule B as an exception.

6. Enforcement based on police power if notice of the enforcement 6. Enforcement based on police power if notice of the enforcement action had been provided in the public record, and was not shown action had been provided in the public record, and was not shown on Schedule B as an exceptionon Schedule B as an exception

7. Exercise of right of eminent domain if a notice of the exercise 7. Exercise of right of eminent domain if a notice of the exercise had been provided in the public record, and was not shown on had been provided in the public record, and was not shown on Schedule B as an exception. Schedule B as an exception.

8. Any taking that has occurred and is binding on 8. Any taking that has occurred and is binding on the rights of Purchaser for value and without the rights of Purchaser for value and without Knowledge.Knowledge.

Covered RisksCovered Risks 9. The invalidity or unenforceability of the lien 9. The invalidity or unenforceability of the lien

of the insured mortgage upon the title.of the insured mortgage upon the title.

No substantive change from 1992 policy, other No substantive change from 1992 policy, other than adding coverage over failure to perform than adding coverage over failure to perform the acts necessary to create a document by the acts necessary to create a document by electronic means authorized by law.electronic means authorized by law.

10. The lack of priority of the lien of the insured 10. The lack of priority of the lien of the insured mortgage on the Title over any other lien or mortgage on the Title over any other lien or encumbrance.encumbrance.

No substantive change from 1992 policy.No substantive change from 1992 policy.


11. (Mechanic’s Lien coverage)11. (Mechanic’s Lien coverage)

No substantive changes from 1992 Policy.No substantive changes from 1992 Policy.

12. The invalidity or unenforceability of 12. The invalidity or unenforceability of any assignment of the Insured any assignment of the Insured Mortgage…Mortgage…

No substantive changes from 1992 Policy. No substantive changes from 1992 Policy.

Covered RisksCovered Risks 13. The invalidity, unenforceability, lack of 13. The invalidity, unenforceability, lack of

priority or avoidance of the lien of the insured priority or avoidance of the lien of the insured Mortgage upon the Title:Mortgage upon the Title: Resulting from a …transfer of interest…occurring prior to Resulting from a …transfer of interest…occurring prior to

the transaction creating the lien…creating the…the transaction creating the lien…creating the…fraudulent or preferential transfer under federal fraudulent or preferential transfer under federal bankruptcy, state insolvency, or similar creditor’s rights bankruptcy, state insolvency, or similar creditor’s rights laws. laws.

Resulting from a preferential transfer by reason of the Resulting from a preferential transfer by reason of the failure of the recording in the Public records to be timely failure of the recording in the Public records to be timely or to impart notice to a BFP, judgment or lien creditor. or to impart notice to a BFP, judgment or lien creditor.

This is new creditor’s rights coverage addressing This is new creditor’s rights coverage addressing transactions occurring prior to the transaction creating transactions occurring prior to the transaction creating the interest being insured. For coverage over the the interest being insured. For coverage over the subject transaction, you will need the Creditor’s Rights subject transaction, you will need the Creditor’s Rights Endorsement, ALTA Form 21-06.Endorsement, ALTA Form 21-06.

Covered RiskCovered Risk 14. The GAP14. The GAP Any defect in or lien or encumbrance on the Title or Any defect in or lien or encumbrance on the Title or

other matter included in Covered Risks 1 through 13 that other matter included in Covered Risks 1 through 13 that has been created or attached or has been filed or recorded has been created or attached or has been filed or recorded in the Public Records subsequent to the Date of Policy and in the Public Records subsequent to the Date of Policy and prior to the recording of the Insured Mortgage in the Public prior to the recording of the Insured Mortgage in the Public Records. Records.

This is an expansion of the prior coverage to automatically This is an expansion of the prior coverage to automatically provide coverage over the GAP after your receipt of the provide coverage over the GAP after your receipt of the marked-up commitment at closing. However, the marked-up commitment at closing. However, the coverage will not include any tax or assessment coverage will not include any tax or assessment obligations that arise in the gap that remain unpaid. But, obligations that arise in the gap that remain unpaid. But, typically there is a schedule B item that is not removed at typically there is a schedule B item that is not removed at closing: “subject to taxes and assessments that constitute closing: “subject to taxes and assessments that constitute a lien but are not yet due and payable”. Otherwise, make a lien but are not yet due and payable”. Otherwise, make sure the mark-up shows taxes paid in full. sure the mark-up shows taxes paid in full.

GENERAL EXCEPTIONSGENERAL EXCEPTIONS

The standard general exceptions will no The standard general exceptions will no longer take exception for matters that may longer take exception for matters that may be disclosed by an accurate survey of the be disclosed by an accurate survey of the premises. premises.

The ALTA policy will no longer have a The ALTA policy will no longer have a survey requirement. However, the local survey requirement. However, the local agents may add back that requirement as agents may add back that requirement as a Schedule B exception based on the a Schedule B exception based on the circumstances. circumstances.

CONDITIONS FOR ALL POLICIESCONDITIONS FOR ALL POLICIES(formerly known as Conditions and Stipulations)(formerly known as Conditions and Stipulations)

1. Definition of Terms1. Definition of Terms

2. Continuation of Insurance2. Continuation of Insurance

3. Notice of Claim to be given 3. Notice of Claim to be given by Insured Claimantby Insured Claimant

4. Proof of Loss4. Proof of Loss

5. Defense and Prosecution5. Defense and Prosecution

6. Duty of Insured Claimant to 6. Duty of Insured Claimant to CooperateCooperate

7. Options to Pay or Otherwise 7. Options to Pay or Otherwise Settle ClaimsSettle Claims

8. Determination and Extent of 8. Determination and Extent of LiabilityLiability

9. Limitation of Liability9. Limitation of Liability

10. Reduction of Insurance10. Reduction of Insurance

11. Payment of Loss11. Payment of Loss

12. Rights of Recovery upon 12. Rights of Recovery upon Payment or SettlementPayment or Settlement

13. Arbitration13. Arbitration

14. Liability Limited to Policy14. Liability Limited to Policy

CONDITIONS FOR ALL POLICIESCONDITIONS FOR ALL POLICIES

1. Definition of Terms1. Definition of Terms

Definition of “Insured” has been expanded to Definition of “Insured” has been expanded to include the following: include the following:

The owner of the indebtedness and each The owner of the indebtedness and each successor in ownership of the indebtedness, successor in ownership of the indebtedness, whether the owner or successor owns the whether the owner or successor owns the indebtedness for its own account or as a trustee indebtedness for its own account or as a trustee or other fiduciary. or other fiduciary.

Definition of “Insured” continuedDefinition of “Insured” continued

The person or Entity who has “control” of the The person or Entity who has “control” of the “transferable record” (as such terms are defined “transferable record” (as such terms are defined by applicable electronic transactions law)by applicable electronic transactions law)

Successors to an insured by dissolution, merger, Successors to an insured by dissolution, merger, consolidation, distribution, or reorganization.consolidation, distribution, or reorganization.

Successors to an Insured by its conversion to Successors to an Insured by its conversion to another kind of Entityanother kind of Entity

DefinitionDefinition of “Insured” continued of “Insured” continued

A Grantee of an Insured under a deed delivered without payment of A Grantee of an Insured under a deed delivered without payment of actual valuable consideration conveying the title:actual valuable consideration conveying the title:

if the stock, shares, memberships or other equity interests of the if the stock, shares, memberships or other equity interests of the grantee are wholly-owned by the named insured;grantee are wholly-owned by the named insured;

if the grantee wholly owns the named insured; orif the grantee wholly owns the named insured; or If the grantee is wholly-owned by an affiliated Entity of the If the grantee is wholly-owned by an affiliated Entity of the

named insured provided the affiliated Entity and the named named insured provided the affiliated Entity and the named insured are both wholly-owned by the same person or Entity.insured are both wholly-owned by the same person or Entity.

Reserving however, all rights and defenses as to any successor that the insurer would have Reserving however, all rights and defenses as to any successor that the insurer would have had against any predecessor Insured, unless the successor acquired the Indebtedness as a had against any predecessor Insured, unless the successor acquired the Indebtedness as a purchaser for value without Knowledge of the asserted defect, lien, encumbrance or other purchaser for value without Knowledge of the asserted defect, lien, encumbrance or other matter insured against by the policy.matter insured against by the policy.

A Non-Imputation Endorsement is typically used to eliminate the above carve-out of coverage. An Affidavit is A Non-Imputation Endorsement is typically used to eliminate the above carve-out of coverage. An Affidavit is typically required by the insurer, be signed by the new insured party. The endorsement and a form of the typically required by the insurer, be signed by the new insured party. The endorsement and a form of the Affidavit required by Chicago Title Company is being provided in KRC. Affidavit required by Chicago Title Company is being provided in KRC.

Definition of “Insured” continuedDefinition of “Insured” continuedA Grantee of an Insured under a deed delivered without payment of actual valuable consideration conveying the title:A Grantee of an Insured under a deed delivered without payment of actual valuable consideration conveying the title:

if the stock, shares, memberships or other equity interests of the grantee are wholly-owned by the named if the stock, shares, memberships or other equity interests of the grantee are wholly-owned by the named insured;insured;

if the grantee wholly owns the named insured; orif the grantee wholly owns the named insured; or If the grantee is wholly-owned by an affiliated Entity of the named insured provided the affiliated Entity and the If the grantee is wholly-owned by an affiliated Entity of the named insured provided the affiliated Entity and the

named insured are both wholly-owned by the same person or Entity.named insured are both wholly-owned by the same person or Entity.

Reserving however, all rights and defenses as to any successor Reserving however, all rights and defenses as to any successor that the insurer would have had against any predecessor Insured, that the insurer would have had against any predecessor Insured, unless the successor acquired the Indebtedness as a purchaser unless the successor acquired the Indebtedness as a purchaser for value without Knowledge of the asserted defect, lien, for value without Knowledge of the asserted defect, lien, encumbrance or other matter insured against by the policyencumbrance or other matter insured against by the policy ..

A Non-Imputation Endorsement is typically used to A Non-Imputation Endorsement is typically used to eliminate the above carve-out of coverage. An Affidavit is eliminate the above carve-out of coverage. An Affidavit is typically required by the insurer, to be signed by the new typically required by the insurer, to be signed by the new insured party. The endorsement and a form of the insured party. The endorsement and a form of the Affidavit required by Chicago Title Company is being Affidavit required by Chicago Title Company is being provided in KRC. provided in KRC.

Definition of Terms - ContinuedDefinition of Terms - ContinuedDefinition of “Indebtedness”.Definition of “Indebtedness”.

The sum of:The sum of: a. The amount of principal disbursed as of the date of the policy;a. The amount of principal disbursed as of the date of the policy; b. the amount of principal disbursed subsequent to the date of the policy;b. the amount of principal disbursed subsequent to the date of the policy; c. the construction loan advances made subsequent to the date of the policy;c. the construction loan advances made subsequent to the date of the policy; d. interest on the loand. interest on the loan e. prepayment premiums and other fees and penaltiese. prepayment premiums and other fees and penalties f. expenses of foreclosuref. expenses of foreclosure g. protective advancesg. protective advances

However, However, the insured lenderthe insured lender MUST ask for a Future Advance MUST ask for a Future Advance EndorsementEndorsement to receive coverage over advances made to receive coverage over advances made subsequent to the date of the policy unless it is a construction subsequent to the date of the policy unless it is a construction loan with pending disbursement endorsements being issued. loan with pending disbursement endorsements being issued.


2. 2. Continuation of Insurance:Continuation of Insurance:

The policy continues in force after conveyance by an insured so long The policy continues in force after conveyance by an insured so long as:as:

a. The insured retains an estate or interest in the Land; ora. The insured retains an estate or interest in the Land; or

b. The insured b. The insured sells the property and takes back a purchase sells the property and takes back a purchase money mortgage from the purchasermoney mortgage from the purchaser (however, if the insured (however, if the insured then assigns his interest in the mortgage to a third party, then assigns his interest in the mortgage to a third party, coverage does not continue to such third party); orcoverage does not continue to such third party); or

c. The insured has liability by reason of warranties in any transfer c. The insured has liability by reason of warranties in any transfer

or conveyance of the title. or conveyance of the title.


3. 3. Notice of Claim to be Given by Insured Claimant.Notice of Claim to be Given by Insured Claimant.

Prompt notice is required in writing upon the Prompt notice is required in writing upon the occurrence of the following:occurrence of the following:

a. Litigation in which any third party asserts a claim covered by this policy a. Litigation in which any third party asserts a claim covered by this policy adverse to the Insured (limited to only those stated causes of action alleging adverse to the Insured (limited to only those stated causes of action alleging matters insured against by the policy); matters insured against by the policy);

b. Knowledge (actual knowledge, not imputed or constructive) of any claim of b. Knowledge (actual knowledge, not imputed or constructive) of any claim of title or interest that is adverse to the title or lien of the insured mortgage, and title or interest that is adverse to the title or lien of the insured mortgage, and that which might cause loss of damage for which the title company may be that which might cause loss of damage for which the title company may be liable; orliable; or

c. If the title is rejected as Unmarketable Title (an alleged or apparent matter that c. If the title is rejected as Unmarketable Title (an alleged or apparent matter that would permit a prospective purchaser, lessee or lender to be released from the would permit a prospective purchaser, lessee or lender to be released from the obligation to purchase, lease or lend if there is a contractual condition requiring obligation to purchase, lease or lend if there is a contractual condition requiring the delivery of marketable title).the delivery of marketable title).



Prompt notice is required in writing upon the occurrence of the following:Prompt notice is required in writing upon the occurrence of the following:

a. Litigation in which any third party asserts a claim a. Litigation in which any third party asserts a claim covered by this policy adverse to the Insured (limited covered by this policy adverse to the Insured (limited to only those stated causes of action alleging matters to only those stated causes of action alleging matters insured against by the policy);insured against by the policy);

b. Knowledge (actual knowledge, not imputed or constructive) of any claim of b. Knowledge (actual knowledge, not imputed or constructive) of any claim of title or interest that is adverse to the title or lien of the insured mortgage, and title or interest that is adverse to the title or lien of the insured mortgage, and that which might cause loss or damage for which the title company may be that which might cause loss or damage for which the title company may be liable; orliable; or

c. If the title is rejected as Unmarketable Title (an alleged or apparent matter that c. If the title is rejected as Unmarketable Title (an alleged or apparent matter that would permit a prospective purchaser, lessee or lender to be released from the would permit a prospective purchaser, lessee or lender to be released from the obligation to purchase, lease or lend if there is a contractual condition requiring obligation to purchase, lease or lend if there is a contractual condition requiring the delivery of marketable title).the delivery of marketable title).

CONDITIONS FOR ALL POLICIES CONDITIONS FOR ALL POLICIES



a. Litigation in which any third party asserts a claim covered by this policy adverse a. Litigation in which any third party asserts a claim covered by this policy adverse to the Insured (limited to only those stated causes of action alleging matters to the Insured (limited to only those stated causes of action alleging matters insured against by the policy); insured against by the policy);

b. Knowledge (actual knowledge, not imputed or b. Knowledge (actual knowledge, not imputed or constructive) of any claim of title or interest that is constructive) of any claim of title or interest that is adverse to the title or lien of the insured mortgage, and adverse to the title or lien of the insured mortgage, and that which might cause loss or damage for which the that which might cause loss or damage for which the title company may be liable; ortitle company may be liable; or

c. If the title is rejected as Unmarketable Title (an alleged or apparent matter that c. If the title is rejected as Unmarketable Title (an alleged or apparent matter that would permit a prospective purchaser, lessee or lender to be released from the would permit a prospective purchaser, lessee or lender to be released from the obligation to purchase, lease or lend if there is a contractual condition requiring the obligation to purchase, lease or lend if there is a contractual condition requiring the delivery of marketable title).delivery of marketable title).




a. Litigation in which any third party asserts a claim covered by this policy adverse to a. Litigation in which any third party asserts a claim covered by this policy adverse to the Insured (limited to only those stated causes of action alleging matters insured the Insured (limited to only those stated causes of action alleging matters insured against by the policy); against by the policy);

b. Knowledge (actual knowledge, not imputed or constructive) of any claim of title or b. Knowledge (actual knowledge, not imputed or constructive) of any claim of title or interest that is adverse to the title or lien of the insured mortgage, and that which interest that is adverse to the title or lien of the insured mortgage, and that which might cause loss of damage for which the title company may be liable; ormight cause loss of damage for which the title company may be liable; or

c. c. If the title is rejected as Unmarketable Title (an alleged or If the title is rejected as Unmarketable Title (an alleged or apparent matter that would permit a prospective apparent matter that would permit a prospective purchaser, lessee or lender to be released from the purchaser, lessee or lender to be released from the obligation to purchase, lease or lend if there is a obligation to purchase, lease or lend if there is a contractual condition requiring the delivery of marketable contractual condition requiring the delivery of marketable title).title).

Warning Regarding Notice of Claim THE POLICY WILL IDENTIFY THE ADDRESS LOCATION

REQUIRED BY THE INSURER FOR PROVIDING NOTICE OF A CLAIM UNDER THE POLICY.

THE ADDRESS WILL BE SHOWN ON THE LAST PARAGRAPH OF THE “CONDITIONS” SECTION OF THE POLICY JACKET

NOTICE TO THE LOCAL AGENT AND NOT THE ABOVE ADDRESS MAY BE DEEMED TO CAUSE PREJUDICE BY THE FAILURE OF THE INSURED CLAIMANT TO PROVIDE PROMPT NOTICE, WHEREIN THE LIABILITY IS REDUCED TO THE EXTENT OF THE PREJUDICE


4. Proof of Loss4. Proof of Loss

A sworn proof of loss isA sworn proof of loss is no longer automatically requiredno longer automatically required, and failure to , and failure to provideprovide

the proof of loss no longer allows the insurer to terminate the policy. the proof of loss no longer allows the insurer to terminate the policy.

Instead, the insurer must first attempt to determine the loss, and thenInstead, the insurer must first attempt to determine the loss, and thenmay require the insured claimant to provide a signed proof of loss, butmay require the insured claimant to provide a signed proof of loss, butit it no longer needs to be swornno longer needs to be sworn to by the insured claimant. to by the insured claimant.

If requested, the proof of loss must describe the defect, lien, If requested, the proof of loss must describe the defect, lien, encumbrance or other matter insured against that constitutes the encumbrance or other matter insured against that constitutes the basis of the loss or damage, and shall state, to the extent possible, basis of the loss or damage, and shall state, to the extent possible, the basis of calculating the amount of the loss or damage. (same the basis of calculating the amount of the loss or damage. (same as 1992 requirement, but not sworn)as 1992 requirement, but not sworn)


5. Defense and Prosecution of 5. Defense and Prosecution of Actions.Actions.

No substantive change to 1992 policy.No substantive change to 1992 policy.

Upon written request by the insured, the insurer, at its own Upon written request by the insured, the insurer, at its own cost and without reasonable delay, shall provide for the cost and without reasonable delay, shall provide for the defense of an insured in litigation in which any third party defense of an insured in litigation in which any third party asserts a claim covered by the policy adverse to the insured asserts a claim covered by the policy adverse to the insured (However, the insurer may at its option choose to pay, (However, the insurer may at its option choose to pay,

settle or buy out the insured’s interest).settle or buy out the insured’s interest).


6. Duty of Insured Claimant to Cooperate.6. Duty of Insured Claimant to Cooperate.

Whenever requested by the insurer, the insured shall give Whenever requested by the insurer, the insured shall give the insurer all reasonable aid in securing evidence, the insurer all reasonable aid in securing evidence, obtaining witnesses, prosecuting or defending the action or obtaining witnesses, prosecuting or defending the action or proceeding, or effecting settlement and any other lawful act proceeding, or effecting settlement and any other lawful act that in the opinion of the insurer may be necessary or that in the opinion of the insurer may be necessary or desirable to establish the title or lien of insured or any other desirable to establish the title or lien of insured or any other matter as insured. matter as insured.

The insurer may reasonably require the insured claimant to submit to examination The insurer may reasonably require the insured claimant to submit to examination under oath by any authorized representative of the insured and to produce for under oath by any authorized representative of the insured and to produce for examination, inspection and copying, all records, in whatever medium maintained, examination, inspection and copying, all records, in whatever medium maintained, including…e-mails, discs, tapes and videos…, and the insured must grant permission including…e-mails, discs, tapes and videos…, and the insured must grant permission to the authorized representative of the insured to examine the records in the custody to the authorized representative of the insured to examine the records in the custody or control of third parties that reasonably pertain to the loss or damage. or control of third parties that reasonably pertain to the loss or damage.

CHANGE FROM 1992 POLICY: No sworn statement of loss by insured is required, CHANGE FROM 1992 POLICY: No sworn statement of loss by insured is required, but now insured claimant must submit to examination under oath, and provide all but now insured claimant must submit to examination under oath, and provide all records including e-mails.records including e-mails.

CONDITIONS FOR ALL POLICIESCONDITIONS FOR ALL POLICIES 6. Duty of Insured Claimant to Cooperate.6. Duty of Insured Claimant to Cooperate.

Whenever requested by the insurer, the insured shall give the insurer all reasonable aid in securing evidence, obtaining Whenever requested by the insurer, the insured shall give the insurer all reasonable aid in securing evidence, obtaining witnesses, prosecuting or defending the action or proceeding, or effecting settlement and any other lawful act that in the witnesses, prosecuting or defending the action or proceeding, or effecting settlement and any other lawful act that in the opinion of the insurer may be necessary or desirable to establish the title or lien of insured or any other matter as insured. opinion of the insurer may be necessary or desirable to establish the title or lien of insured or any other matter as insured.

The insurer may reasonably require the insured claimant to The insurer may reasonably require the insured claimant to submit to examination under oath by any authorized submit to examination under oath by any authorized representative of the insured and to produce for examination, representative of the insured and to produce for examination, inspection and copying, all records, in whatever medium inspection and copying, all records, in whatever medium maintained, including…e-mails, discs, tapes and videos…, and maintained, including…e-mails, discs, tapes and videos…, and the insured must grant permission to the authorized the insured must grant permission to the authorized representative of the insured to examine the records in the representative of the insured to examine the records in the custody or control of third parties that reasonably pertain to custody or control of third parties that reasonably pertain to the loss or damage. the loss or damage.

CHANGE FROM 1992 POLICY: No sworn proof of loss by CHANGE FROM 1992 POLICY: No sworn proof of loss by insured is required, but now insured claimant must submit to insured is required, but now insured claimant must submit to examination under oath, and provide all records including e-examination under oath, and provide all records including e-mails.mails.


7.7. Options to Pay or Otherwise Settle Options to Pay or Otherwise Settle Claims; Termination of LiabilityClaims; Termination of Liability

No significant changes from 1992 policy.No significant changes from 1992 policy.

In case of a claim under the policy, the insurer has the option to In case of a claim under the policy, the insurer has the option to pay or tender payment of the amount of the insurance, together pay or tender payment of the amount of the insurance, together with any costs, attorneys’ fees and expenses incurred by the with any costs, attorneys’ fees and expenses incurred by the insured claimant that were authorized by the insurer.insured claimant that were authorized by the insurer.


8.8. Determination and Extent of Determination and Extent of LiabilityLiability

Two new expansions of coverage.Two new expansions of coverage.If the insurer takes the defense and is unsuccessful in If the insurer takes the defense and is unsuccessful in establishing title in the insured, then:establishing title in the insured, then:

a. the amount of insurance is increased by an a. the amount of insurance is increased by an additional 10%; and additional 10%; and

b.b. The insured can have the loss determined as The insured can have the loss determined as of the date the claim was made or as of the date it is of the date the claim was made or as of the date it is settled and paid.settled and paid.


Elimination of Co-Insurance ProvisionElimination of Co-Insurance Provision

In the 1992 policy, when the owner purchased In the 1992 policy, when the owner purchased insurance in an amount less than 80% of the full insurance in an amount less than 80% of the full consideration paid for the land, or when the consideration paid for the land, or when the insured subsequently constructed improvements insured subsequently constructed improvements that increased the value of the land by 20% over that increased the value of the land by 20% over the amount of insurance purchased, then the the amount of insurance purchased, then the insured owner was considered a co-insurer and insured owner was considered a co-insurer and recovery was based on a prorata calculation. recovery was based on a prorata calculation.

This provision is now removed.This provision is now removed.


Elimination of Apportionment ProvisionElimination of Apportionment Provision

In the 1992 policy, when the policy included two or In the 1992 policy, when the policy included two or more parcels that were not used as a single site, more parcels that were not used as a single site, and a claim arose against one of the parcels, then and a claim arose against one of the parcels, then the insured could limit the insured’s maximum the insured could limit the insured’s maximum recovery by prorating based on the value of each recovery by prorating based on the value of each parcel as of the date of the policy.parcel as of the date of the policy.

This provision is now removed. This provision is now removed.


9. Limitation of Liability9. Limitation of Liability

No significant change from 1992 policy.No significant change from 1992 policy.

In the event of any litigation, either by the In the event of any litigation, either by the insurer or with the consent of the insurer, insurer or with the consent of the insurer, the insurer shall have no liability for loss or the insurer shall have no liability for loss or damage until there has been a final damage until there has been a final determination and disposition of all determination and disposition of all appeals.appeals.


10. Reduction of Insurance; Reduction or Termination of 10. Reduction of Insurance; Reduction or Termination of Liability.Liability.

1992 Policy: All payments under this policy shall reduce the amount 1992 Policy: All payments under this policy shall reduce the amount of insurance of insurance pro tanto.pro tanto.

2006 Policy: All payments under this policy shall reduce the Amount 2006 Policy: All payments under this policy shall reduce the Amount of Insurance of Insurance by the amount of the payment.by the amount of the payment.

The effect of this change is the elimination of the need for a Last The effect of this change is the elimination of the need for a Last Dollar Endorsement. In the past, if the loan amount was greater Dollar Endorsement. In the past, if the loan amount was greater than the amount of insurance coverage because of additional than the amount of insurance coverage because of additional collateral, then as payments are made by the borrower to reduce collateral, then as payments are made by the borrower to reduce the principal, the policy coverage would be reduced. The insurer the principal, the policy coverage would be reduced. The insurer would argue that it was the first $ that was covered. So the Last would argue that it was the first $ that was covered. So the Last Dollar endorsement was needed to switch from first $ to last $.Dollar endorsement was needed to switch from first $ to last $.

Now, only claim payments serve to reduce the Amount of Insurance. Now, only claim payments serve to reduce the Amount of Insurance.


11.11. Payment of Loss Payment of Loss

The 1992 policy required, as a condition to The 1992 policy required, as a condition to insured’s payment obligations, to produce insured’s payment obligations, to produce the policy or proof of it being lost or the policy or proof of it being lost or destroyed. destroyed.

Now, no such requirement exists since the Now, no such requirement exists since the title company should be able to keep its title company should be able to keep its own records.own records.


12. Rights of Recovery upon Payment or 12. Rights of Recovery upon Payment or Settlement.Settlement.

When a claim has been settled, the insurer When a claim has been settled, the insurer is automatically subrogated and entitled to is automatically subrogated and entitled to the rights of the insured claimant without the rights of the insured claimant without the need for any further document. the need for any further document. However, if requested by the insurer, the However, if requested by the insurer, the insured claimant must execute this insured claimant must execute this subrogation, but that obligation is deferred subrogation, but that obligation is deferred if the claimant received only a payment on if the claimant received only a payment on account of the claim that does not fully account of the claim that does not fully cover the loss. cover the loss.


13. 13. ArbitrationArbitration

The policy has been revised to increase The policy has been revised to increase from $1 million to $2 million the Amount of from $1 million to $2 million the Amount of Insurance threshold up to which arbitration Insurance threshold up to which arbitration can be invoked unilaterally by either the can be invoked unilaterally by either the insured or the insurer. Over this threshold, insured or the insurer. Over this threshold, arbitration is used only when agreed by arbitration is used only when agreed by both insured and insurer. both insured and insurer.

The Waiver of Arbitration Endorsement is The Waiver of Arbitration Endorsement is available.available.


14. Liability Limited to this Policy14. Liability Limited to this Policy

No significant changes from the 1992 No significant changes from the 1992 Policy.Policy.

If an endorsement isn’t signed, then If an endorsement isn’t signed, then it must be expressly incorporated by it must be expressly incorporated by Schedule A of the policy. Schedule A of the policy.

Schedule ASchedule Aof the 2006 Policiesof the 2006 Policies

The ALTA review committee has The ALTA review committee has created an option Section 6 to created an option Section 6 to Schedule A which would identify a list Schedule A which would identify a list of common ALTA endorsements for a of common ALTA endorsements for a check-off inclusion to the policy. This check-off inclusion to the policy. This optional Section 6 is not currently optional Section 6 is not currently being used locally, but may begin to being used locally, but may begin to appear in the future. appear in the future.

EndorsementsEndorsements

The ALTA endorsement forms were all The ALTA endorsement forms were all revised to include defined terms provided revised to include defined terms provided in the policies. There are additional state in the policies. There are additional state endorsements that are available. endorsements that are available.

All of the ALTA Endorsements will soon be All of the ALTA Endorsements will soon be available on KRC.available on KRC.

State endorsements issued by Chicago State endorsements issued by Chicago Title will soon be available on KRC. Title will soon be available on KRC.

New EndorsementsNew Endorsements

There are a few new endorsements There are a few new endorsements made available under the 2006 made available under the 2006 Owner’s and Loan policies.Owner’s and Loan policies.

a. Manufactured Housing a. Manufactured Housing

b. Restrictions, Encroachments, b. Restrictions, Encroachments, MineralsMinerals

c. Locationc. Location

d. Future Advanced. Future Advance

Manufactured Housing Manufactured Housing Endorsement Endorsement

ALTA 7.1-06 Manufactured Housing Unit – Conversion - LoanALTA 7.1-06 Manufactured Housing Unit – Conversion - Loan

Revises the term “Land” under the policy to include the Revises the term “Land” under the policy to include the manufactured housing unit located on the Land at Date of Policy, manufactured housing unit located on the Land at Date of Policy, and insures against loss or damage if, at Date of Policy: and insures against loss or damage if, at Date of Policy:

a. The unit is not located on the Land.a. The unit is not located on the Land. b. The unit is not “real property” under the law of the state where b. The unit is not “real property” under the law of the state where

the Land is located. the Land is located. c. The owner of the Land is not the owner of the unit.c. The owner of the Land is not the owner of the unit. d. Any lien is attached to the unit as personal property.d. Any lien is attached to the unit as personal property. e. The lien of the insured mortgage is not enforceable against the e. The lien of the insured mortgage is not enforceable against the

Land in a single foreclosure proceeding.Land in a single foreclosure proceeding.

The Owner’s Policy version is 7.2-06 and it includes all except “e”.The Owner’s Policy version is 7.2-06 and it includes all except “e”.

Restrictions, Encroachments, Restrictions, Encroachments, MineralsMinerals

The ALTA 9 Endorsement has now become The ALTA 9 Endorsement has now become three different endorsements, one for the three different endorsements, one for the Loan policy, and two versions for the Loan policy, and two versions for the Owner’s policy.Owner’s policy.

ALTA 9.3-06 Restrictions, Encroachments, ALTA 9.3-06 Restrictions, Encroachments, Minerals – Loan PolicyMinerals – Loan Policy

ALTA 9.4-06 Restrictions, Encroachments, ALTA 9.4-06 Restrictions, Encroachments, Minerals –Owner’s Policy – Unimproved LandMinerals –Owner’s Policy – Unimproved Land

ALTA 9.5-06 Restrictions, Encroachments, ALTA 9.5-06 Restrictions, Encroachments, Minerals – Owner’s Policy – Improved LandMinerals – Owner’s Policy – Improved Land

ALTA 9 New ProtectionALTA 9 New Protection

In each of the three versions, an additional insuring In each of the three versions, an additional insuring provision has been added to afford coverage for provision has been added to afford coverage for damage to damage to “improvements”, including lawns, “improvements”, including lawns, shrubbery or trees, located on the Land on or after shrubbery or trees, located on the Land on or after Date of Policy Date of Policy resulting from the future exercise of resulting from the future exercise of any right of surface entry to extract or develop any right of surface entry to extract or develop minerals that have been severed from the underlying minerals that have been severed from the underlying title and are excepted by a Schedule B exception.title and are excepted by a Schedule B exception.

However, there was no change from the prior However, there was no change from the prior

endorsement wherein coverage remains for damage endorsement wherein coverage remains for damage only to only to “existing improvements”“existing improvements”, including lawns, , including lawns, shrubbery, or trees, located or encroaching on that shrubbery, or trees, located or encroaching on that portion of the Land subject to any easement portion of the Land subject to any easement excepted in Schedule B. excepted in Schedule B.

ALTA 9 Owner’s VersionsALTA 9 Owner’s Versions Unimproved Land version:Unimproved Land version:

Coverage over damage to improvements (excluding Coverage over damage to improvements (excluding lawns, shrubbery or trees) lawns, shrubbery or trees) constructed on the Landconstructed on the Land after Date of Policy resulting from the future exercise after Date of Policy resulting from the future exercise of any right to use the surface of the Land for of any right to use the surface of the Land for extraction or development of minerals…extraction or development of minerals…

Improved Land version: Improved Land version:

Coverage over damage to improvements (excluding Coverage over damage to improvements (excluding lawns, shrubbery or trees) lawns, shrubbery or trees) located on the Landlocated on the Land on or on or afterafter Date of Policy resulting from the future exercise Date of Policy resulting from the future exercise of any right to use the surface of the Land for of any right to use the surface of the Land for extraction or development of minerals…extraction or development of minerals…

Location EndorsementsLocation Endorsements

ALTA Form 22-06 Location: This deals ALTA Form 22-06 Location: This deals with the type of improvement that is with the type of improvement that is located on the land and the applicable located on the land and the applicable street address.street address.

Coverage over loss or damage by reason Coverage over loss or damage by reason of the failure of a (of the failure of a (description of description of improvementimprovement) known as () known as (street addressstreet address) ) to be located on the Land at Date of to be located on the Land at Date of Policy.Policy.

Location Endorsement - MapLocation Endorsement - Map

ALTA Form 22.1-06 Location and MapALTA Form 22.1-06 Location and Map

Coverage against loss or damage by reason of the failure of Coverage against loss or damage by reason of the failure of ((description of improvementdescription of improvement) known as () known as (street addressstreet address) to ) to be located on the Land at Date of Policy.be located on the Land at Date of Policy.

Coverage against loss or damage by reason of failure of theCoverage against loss or damage by reason of failure of the map map attached to this policy to correctly show the location attached to this policy to correctly show the location and dimensions of the Land according to the Public Records. and dimensions of the Land according to the Public Records.

Since a survey is no longer required for coverage over Since a survey is no longer required for coverage over survey matters, this allows a way to provide additional survey matters, this allows a way to provide additional coverage when your client doesn’t want to pay for a survey, coverage when your client doesn’t want to pay for a survey, but you want to make sure that the building is actually but you want to make sure that the building is actually located on the propertylocated on the property. .

Future Advance Future Advance EndorsementsEndorsements

There are 4 different types of Future There are 4 different types of Future Advance Endorsements:Advance Endorsements:

a. Form 14-06 – Prioritya. Form 14-06 – Priority

b. Form 14.1-06 – Knowledgeb. Form 14.1-06 – Knowledge

c. Form 14.2-06 – Letter of Creditc. Form 14.2-06 – Letter of Credit

d. Form 14.3-06 – Reverse Mortgaged. Form 14.3-06 – Reverse Mortgage

Future Advance EndorsementFuture Advance Endorsement

We should be asking for Form 14-06 We should be asking for Form 14-06 (Future Advance – Priority). (Future Advance – Priority).

We may receive Form 14.1-06 (Future We may receive Form 14.1-06 (Future Advance – Knowledge).Advance – Knowledge).

Difference: Section 4.d is added to Difference: Section 4.d is added to Form 14.1Form 14.1

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