FIRST AMERICAN TITLE INSURANCE COMPANY NATIONAL …

1 TITLE INSURANCE ENDORSEMENTS:ALTA AND TEXAS(Ver. 8-20-14)Presented ByRICHARD D. WORSHAMU nderwriting CounselFIRST AMERICAN TITLE INSURANCE COMPANYNATIONAL COMMERCIAL SERVICES601 TRAVIS; Suite 1875 HOUSTON, TX 77002(713) BAR ASSOCIATION LUNCHEONS eptember 17, 2014 Table of of of Commonly Requested on Both Owner & Loan (1)ALTA 9, ALTA 28, ALTA 354(2)T-19, , , Coverage (Survey Deletion/ALTA 25, ) (T-23/ ALTA- 17) (T-25/ ALTA-19) (ALTA 3, , ) (T-4,T-5/ ALTA-13) Requested Loan policy Loss (T-14/ ALTA-20) (ALTA 27) Advance/Revolving Credit (T-35/ ALTA-14) Rate (T-33, ALTA-6 & ) Lot (ALTA 18) (ALTA 26) (ALTA 22) Lien (T-36/ & ) (T-16/ ALTA-12) Unit Development (T-17/ALTA 5) & Mezzanine (T-24, ALTA-15, , ) (T-48/ ALTA-23) of Rents and Leases (T-27/ALTA 37) (ALTA 41, , ) Only Home Equity Loan (T-42 & ) Mortgage (T-43/ALTA ) Housing (T-31 )

2 Of Available ALTA/TDI Endorsements17 TITLE INSURANCE Endorsements: ALTA and Texas(Ver. 8-20-14)- Page 2 of 17 TITLE INSURANCE ENDORSEMENTS:ALTA AND OF ENDORSEMENTSThe AMERICAN Land TITLE Association, commonly known by the acronym ALTA, is not a state orfederal regulator, but a trade association representing the TITLE INSURANCE industry. It promulgatesforms with no obligation for anyone to use them, but these forms are generally used in 49 of the50 states of the union, and most territories of the United States. Texas is where ALTA forms arenot used, because TITLE INSURANCE forms in Texas are promulgated by the state regulator, the TexasDepartment of INSURANCE ( TDI ). However, it should not be a surprise that the forms used byALTA often influence the forms promulgated by TDI, and on rare occasions, Texas addition to ALTA, the California Land TITLE Association (CLTA) also promulgates titleinsurance forms, and these are not only used in California, but among most of the RockyMountain States and along the West coast.

3 CLTA forms are often duplicative or even identicalto ALTA forms, but the CLTA forms have a larger and greater diversity of versions applicable tospecific situations. In addition, when a particular CLTA form becomes popular, there is atendency for ALTA to develop a version, as ALTA recently did in December of 2013 when itadopted several water endorsements that are similar to CLTA endorsements. Because of theoverlap of common provisions in CLTA and ALTA forms, because CLTA forms are not used inmost of the United States, and in the interest of brevity, this paper does not address CLTA the unofficial nature of the ALTA and CLTA forms are the various state the federal McCann-Ferguson Act, regulation of INSURANCE companies is reserved to thevarious states, and each state s INSURANCE department regulates the TITLE INSURANCE industry tosome greater or lesser some states where ALTA forms are used, the forms must be approved and adopted by the stateagency, often with minor changes, before they can be used.

4 These states may not have adoptedall of the ALTA forms, and some endorsements may not be available states are what we call filed form states, where the State does not have official forms,and often does not even approve the forms, but the TITLE COMPANY must file the form with thestate before it can be issued. These filed form states generally fall into two categories, thosewhere if the form is filed by any TITLE INSURANCE COMPANY it can be used by any TITLE insurancecompany, and those where the filed form may only be used by the COMPANY which filed , in some states you may find a form filed by one TITLE COMPANY but not another,and so available from one TITLE COMPANY but not are a handful of states where TITLE companies are allowed to issue coverage on whateverforms they choose, and mostly ALTA forms are used in those addition to these ALTA and CLTA forms, in states other than Texas it is possible for the titlecompany to draft its own forms.

5 And we will occasionally see a form used that is specific to theTitle INSURANCE Endorsements: ALTA and Texas(Ver. 8-20-14)- Page 2 of 17title COMPANY using it. For example, the FIRST AMERICAN 61 form is commonly used forincremental coverage for mechanics liens in ALTA states, and there is no exact ALTA or CLTA equivalent. These sort of special endorsements are too specific to particular companies andparticular circumstance to be covered by this Texas, Procedural Rule P-35 of the Texas Basic Manual for TITLE INSURANCE states specificallythat: No TITLE INSURANCE COMPANY , TITLE INSURANCE Agent, Direct Operation, Escrow Officer, nor anyemployee, officer, director or agent of any such entity or person, shall issue or deliver any formof verbal or written guaranty, affirmation, indemnification, or certification of any fact, insurancecoverage or conclusion of law to any insured or party to a transaction other than.

6 (i) a statementthat a transaction has closed and/or has been funded, (ii) issuance of an insured closing serviceletter, or any insuring form or endorsement promulgated by the State Board of INSURANCE , or (iii)certification of copies of documents as being true and exact copies of the original document or ofthe document recorded in the public records. Further, Texas INSURANCE Code Section (c) states, Unless authorized by rule adoptedby the commissioner, an insurer may not enter into a contract or other agreement concerning anindividual TITLE INSURANCE policy if the contract or other agreement is not expressed in the contract or agreement prohibited by this subsection is void. That is, if the TITLE INSURANCE coverage is not on a Texas TDI promulgated form, it is not validtitle INSURANCE in cannot issue TITLE INSURANCE using ALTA forms in , because ALTA forms are used every place else in the United States but Texas, aTexas attorney often sees lender instructions requesting ALTA forms, and this paper shouldallow you to interpret these instructions and converse with the lender about what coverage theycan OF ENDORSEMENTSB efore we talk about specific endorsements, it is important to understand the purpose of TITLE INSURANCE policy jacket is composed of three main parts, the Insuring Clauses, Exclusionsfrom Coverage, and finally the Conditions.

7 Simply stated, a TITLE INSURANCE policy is a contract ofindemnity where the TITLE COMPANY indemnifies and holds harmless the named Insured againstcertain events covered under the Insuring Clauses, subject to the Exclusions From Coverage, anyspecial exceptions to TITLE shown on Schedule B to the policy , and further subject to the statedConditions and Stipulations to the policy . Webster s defines an endorsement as a provisionadded to an INSURANCE contract altering its scope or application. A TITLE INSURANCE endorsementtherefore is an amendment, change, alteration, deletion, or other deviation from the standardstated coverage, accomplished by deleting or amending an exclusion or condition/stipulation, orby providing coverage over what would otherwise be an exception to TITLE , and therefore a non-covered INSURANCE Endorsements: ALTA and Texas(Ver.)

8 8-20-14)- Page 3 of 17 Metaphorically, the INSURANCE policy is a blanket, the exceptions to the policy are holes in theblanket, and endorsements are an attempt to sew patches over the holes, as best as can be donewith the facts in typical format of an endorsement will: Identify the name of the endorsement ; Identify the policy it amends; State the amending language; Any limitations in language will specify any conditions to the endorsement . One of these will be tospecifically state whether the date of policy is changed by the endorsement , or if the amendmentapplies back to the original effective date of the policy . As a general rule, an endorsement willnot change the effective date of the policy unless expressly fall into two basic groups, those that are available to amend the owner s policy ( OTP ) and those that are available to amend the loan commonly requested on both Owner s and Loan Policies include: ComprehensiveoMineralsoCCR soEncroachments Survey CoverageoAccess Zoning Contiguity Leasehold Delete ArbitrationEndorsements Commonly Requested on Loan Policies include: FIRST Loss Usury Revolving Credit Variable Rate Tax Lot Subdivision Address Environmental Lien Tie-In (Aggregation) PUD Mezzanine Non-Imputation Co-InsuranceTitle INSURANCE Endorsements: ALTA and Texas(Ver.

9 8-20-14)- Page 4 of 17 The list of endorsements in the Appendix shows if the endorsement is available on an OTP only,a loan policy only, or if it available on COMMONLY REQUESTED ON BOTH OWNER & (also known as Restrictions, Encroachments and Minerals)Originally this was the ALTA Form 9 Series of endorsements, which in turn inspired the TexasT-19 (Loan policy ) and (Owner s TITLE policy ). Comprehensive endorsements are themost commonly requested endorsements for both an Owner s TITLE policy and a Loan endorsements originally combined coverage of several commonly requestedendorsements into a single endorsement : (a) coverage for encroachments, (b) violations ofcovenants, conditions and restrictions ( CCR s), and (c) damages to improvements for the Texas T-19 and can still be characterized as comprehensiveendorsements, the ALTA endorsements cannot RevisionsIn 2012, the ALTA Forms Committee decided to extensively revise the ALTA 9 coverage,producing 6 versions of the ALTA 9.

10 ALTA Unimproved Land - CCR s - OTP ALTA Improved Land - CCR s OTP ALTA CCR s Loan policy ALTA Particular private rights , CCR s Loan policy ALTA CCR s, encroachments, minerals, property under development LoanPolicy ALTA - CCR s, encroachments, minerals, property under development Owner sPolicy(ALTA and ALTA were withdrawn)This revision restricts the use of the , and to coverage for violations of covenants only,while the adds coverage against certain private rights, such as a right of FIRST refusal andcertain restrictions on transfer. The and remain comprehensive endorsements, but mayonly be used in connection with provide coverage similar to the older ALTA 9 forms, the policy now needs two additionalendorsement groups, the ALTA 28 for encroachments into setback lines, easements, and acrossproperty lines, and the ALTA 35 to protect against damages to improvements from developmentof 28 forms include: ALTA 28 Encroachment into easements ALTA Encroachment into easements, setback lines, property INSURANCE Endorsements: ALTA and Texas(Ver.)