Title — continued from Page 42
the expense of having researchers travel to the city’s record location, which might be indifferently or inconveniently organ- ized. Previously, attorneys had conducted such searches on behalf of clients – an expensive practice. The first title insurance company in
California was incorporated in 1886 as the California Title Insurance & Trust Company. California recognized the class of insurance in 1887, and California Title Insurance & Trust Company issued later that year. In 1895, the first real estate transaction to use escrow in California took place. The escrow process whereby the buyer pays money and the seller deposits title with a neutral third party further accelerated the growth of title insurance.
Currently, title insurance companies
research public records, many of which are available electronically, and do not maintain their own database of all property within their geographic region of operation.
Types of title-insurance policies Usually, a title insurer as part of the
escrow process will issue a preliminary report identifying the defects relating to the property prior to the issuance of the policy. In most cases, the policy is then purchased later, but this disclosure pro- vides the buyer the opportunity to refuse to purchase the property should some- thing be included in the report that was not previously disclosed to the buyer. Under these circumstances, the buyer can
extract themselves form the transaction. If the buyer does cancel the transaction based on the title insurance company’s preliminary report, then no title insur- ance policy will be issued, and there are no claims to be made against the insurer. Title insurance policies are com-
posed as are most policies of a grant of coverage and then a series of exclusions. The unique structural aspect of title insur- ance policies is that they include as an addendum or attachment a list of all the defects on title. The attachment becomes a part of the policy itself. An easement, for example, that appears in such an attachment cannot be the subject of a claim under the policy so long as it is accurately described in the policy. Since the seller usually pays for the
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title insurance policy, the seller usually selects the title insurance company to use, although there is only a tiny variation in premium charges among the few title insurance companies in California. A fed- eral law, however, requires that the buyer be permitted to select the specific title insurance company: the Real Estate Settlement Procedures Act, 12 U.S.C. § 2601, requires that a buyer of residential property be permitted to select the title insurance company even if another party is paying for the policy. • Title-insurance coverage Title insurance policies today are
mostly based on standardized forms across the industry. The American Land Title Association is the source of most title insurance policies. These forms over time have increased coverage, first at the behest of credit life insurance companies seeking to protect their investment and later the banking sector eager to have some other entity take on the risk of title defects. Over time, coverage for “mar- ketability of title” was insured in the stan- dard form so that if the insured later wanted to sell the property, the insured would be covered if the buyer could right- fully point out that the insured’s title to the property was defective. A leasehold estate is a defect on title
and is covered under a title policy so long as it is not included in the title policy and
See Title, Page 48
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