Last revised in 2006, title insurance policy forms and endorsements published by the American Land Title Association (“ALTA”) were published last summer and are slowly being approved and adopted state by state. The state of Florida Office of Insurance Regulation approved the new forms with an effective date of October 1, 2022. Approval by other states is anticipated in the coming months. In general, the revised forms add, improve and broaden coverage in favor of lenders.
The revised forms embrace the concept of electronic transactions. For instance, the ALTA 2021 Loan Policy form provides in the heading: “This policy, when issued by the Company with a Policy Number and the Date of Policy, is valid even if this policy or any endorsement to this policy is issued electronically or lacks any signature.” The new Loan Policy also includes in the definition of notarized documents those that are notarized via remote online notarization. These revisions make it clear that certain aspects of electronic transactions are covered by the title insurance policies. Consequently, the definition of “Covered Risks” extends to a title defect caused by an improperly notarized document, including those by remote online notarization, or by the repudiation of an electronics signature.
Other important revisions to the definition of “Covered Risks” in favor of lenders include that of “Indebtedness.” The revised definition explicitly defines the specific components of indebtedness to include the amount of the principal disbursed as of the date of the policy, the interest on the secured obligation, reasonable expense of foreclosure, amounts advanced for insurance premiums for real estate taxes and assessments by a property owner’s association.
Portions of Schedules A and B have undergone significant revisions. Unlike the ALTA 2006 Loan Policy form, there is no specific list of optional endorsements in the ALTA 2021. Instead, while endorsements may be incorporated by reference, they have to be specifically listed on Schedule A. Conversely, endorsements that require substantial transaction information must be attached to the policy and not incorporated by reference.
Schedule B now includes two introductory paragraphs repudiating illegal discriminatory provisions that may appear in some historical land records. The language now applies to all covenants and restrictions accepted in Schedule B and redacts any discriminatory language. The provision makes clear that the policy does not perpetuate or republish illegal provisions but preserves only those portions of the covenants or restrictions that are enforceable.
The Conditions section of the Loan Policy has undergone important revisions. For example, the term “Insured” now includes an affiliate of the lender who acquires by means of a certificate of title or a deed in lieu of foreclosure. This change is significant to lenders who take title in the name of an affiliated entity and extends coverage beyond the owner of the indebtedness. Worth mentioning is the re-numbering of the Arbitration provision from former paragraph 13 to a new paragraph 18. The condition remains optional although the language has been restructured to improve readability.
These are just a handful of the changes contemplated by the new ALTA 2021 forms. Check with local jurisdictions for status of adoption of these new forms. For more information regarding title insurance matters, contact the attorneys at Starfield & Smith at 215.542.7070.