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The 2016 American Land Title Association Title Insurance Commitment

Posted By USFN, Tuesday, April 17, 2018
Updated: Monday, April 16, 2018

April 17, 2018

by Ellen Fornash
Anselmo Lindberg & Associates, LLC – USFN Member (Illinois)

In June 2016, in an effort to become more streamlined and comprehensive, the Board of Governors of the American Land Title Association (ALTA) approved revision recommendations to the 2016 ALTA Title Insurance Commitment. These took effect on August 1, 2016. The 2016 Commitment form combines two 2006 versions of the form and became generally put into use nationwide in 2017. Not only did the board seek to promote a better understanding and uniformity of the commitment provisions and formatting, it sought to define the scope and purpose of a title commitment itself. The most significant revisions to the commitment are five-fold:

1. Of greatest importance to mortgagees and lenders, the 2016 ALTA commitment now limits underwriter liability solely to contract claims. Previously, lenders often attempted to sue title companies under tort theories and, in some courts, were successful (U.S. Bank, N.A. v. Integrity Land Title Corp., 929 N.E.2d 742, 2010 Ind. LEXIS 396). Many lenders inferred a title commitment to be an abstract of title and/or legal opinion of the state of the title provided for the benefit of the lender. In actuality, any information concerning the state of the title included in a title commitment is for the benefit of the title company in making its determination of coverage. The 2016 ALTA forms clearly mirrors Illinois case law when stating in no uncertain terms that liability is therefore limited to matters of contract only (First Midwest Bank, N.A. v. Stewart Title Guar. Co., 218 Ill. 2d 326, 843 N.E.2d 327, 2006 Ill. LEXIS 14, 300 Ill. Dec. 69). This limitation is boldly stated in a “Notice” on the first page of the commitment form, and also in Condition 3(a). The notice states that the “commitment is not an abstract of title, report of the condition of title, legal opinion, opinion of title, or other representation of the status of title.”

2. Liability is further limited by the 2016 ALTA commitment to exclude claims against the insurer that arise from settlement or closing defects. It is common practice for an agent of the insurer to conduct the settlement or closing; however, the agent at the closing is not acting on behalf of the underwriter for purposes of the closing. Misperceptions of the agent’s scope of representation have also led to tort claims against the insurer. Therefore, the 2016 ATLA commitment sets forth that the closing agent is not the title company’s agent for purposes of the closing.

3. The 2016 ALTA commitment now requires that a specific length of time limiting the validity of the commitment be inserted into the commitment itself. This is commonly six months.

4. The 2016 ALTA commitment promotes uniformity amongst all underwriters by requiring the inclusion of specific sections:

a. NOTICE: Defines the scope and purpose of the commitment and limits liability;
b. Commitment to Issue Policy;
c. Commitment Conditions: Includes a definitions section and, again, limits liability;
d. Schedule A: Now requires the inclusion of a specific dollar amount of coverage;
e. Schedule B, Part 1: Sets forth the requirements that must be met to issue the policy;
f. Schedule B, Part 2: Includes both general and specific exceptions to coverage.

5. Finally, the new form requires a written or electronic signature by the company or its agent.

In addition to title commitments, title companies in Illinois offer two other relevant products. A Tract Search (also called a property report) is a collection of information obtained from the county records about a particular person and property. Much of the information accumulated may not actually attach to the property in question or be relevant to a foreclosure. Furthermore, this product does not offer any insurance to the lender. Minutes of Foreclosure, on the other hand, specify only title information and liens that do attach to a specific foreclosed property. Minutes of Foreclosure include “necessary and permissible parties” to a foreclosure action before the action is filed. This specialized search offers protection to a lender throughout the foreclosure process and in post-sale transactions as well.

The Tract Search or property report is equivalent in the states of Illinois, Ohio, and Kentucky. Again, this product searches for a large amount of data, including transfers of ownership, judgments, and liens against the property. These searches are taken from the public record, typically extend back 40 to 60 years, and offer a basic level of protection — but no insurance.

A Title Abstract is similar to the Tract Search but is not limited to a certain amount of time. It is more expensive and time-consuming, but covers the entire history of the property to its point of origin, or as far back as public record allows. Again, this is not insurance. Insurance will require a Title Commitment and Policy, which will indemnify against any loss due to a defect or encumbrance on property not specifically excepted in the policy.

The states of Ohio and Kentucky do not offer Minutes of Foreclosure; however, Ohio Revised Code § 2329.191 requires a Preliminary Judicial Report to be filed in every action demanding the judicial sale of real property. The Preliminary Judicial Report must include, among other items, the name and address of every recorded lienholder on the real property. The Preliminary Judicial Report is prepared by a title company and requires that a title search be conducted.

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Note for consideration of the USFN Award of Excellence: This article is not a "Feature."


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