While time may not always allow an attorney to read through every detail of the boilerplate title insurance policy, a skilled practitioner should definitely know the exact details of the customized portions of the policy and the scope of the title insurance coverage given by endorsements.
Endorsements are additions to the standard contract which can modify the coverage offered and can substantially change the impact of certain provisions.The law governing endorsements varies by state, and may be applicable to either the owner’s or lender’s policy, or both. Endorsements may be customized to meet the needs of the proposed insured, or the nature of the property to be insured.
Know Thy Endorsements
An example of a common endorsement in the residential real estate industry is ALTA 4, which is issued in conjunction with the insuring of a condominium. This endorsement clarifies the conditions of coverage if the property fails to be part of a condominium within the meaning of the statutes of the jurisdiction, or if the documentation fails to comply with requirements of the statutes, or if any violations are present which restrict the use of the unit and it’s common elements.
Otherwise, in commercial title insurance policies, each endorsement fulfills a particular purpose. Endorsements may be tailored to fit a special set of circumstances, such as the risks pertaining to a revolving credit or line of credit, non-imputation during a partnership buyout, mezzanine loans, access, zoning, or property contiguity issues.
All endorsements are subject to approval by the title underwriter. There may be conditions that must be met before the endorsement can be issued. A full understanding of policy endorsements and their benefits will ensure a client’s proper title insurance coverage.